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On the road to the euro zone. Currency rate stabilization: experiences of the selected EU countries

Listed author(s):
  • Slawomir Bukowski

The aim of this article is to show the threats connected with the exchange rate stabilization within the framework of ERM II and the analysis of the randomly selected EU countries – candidates for the Euro Zone. A two year stabilization of the exchange rate within the ERM II required prior to the Euro Zone accession is connected with numerous risks typical of a fixed rate with a hard band of fluctuations. There are two ways of exchange rate stabilization – a standard one as in the case of the Slovenian Tolar or a currency board (the case of the Baltic states). Neither of them is free of drawbacks. Against this background a question can be formulated: is the exchange rate stabilization indispensable for the Euro Zone accession at all? More and more arguments are raised against it. The most relevant ones refer to the criteria of price stability and fiscal stability. Stabilization of the exchange rate within the ERM II for two years in the situation of free capital flows may not be successful and there is a probability of the currency crisis in the country stabilizing the exchange rate.

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Paper provided by Università di Perugia, Dipartimento Economia in its series Quaderni del Dipartimento di Economia, Finanza e Statistica with number 50/2008.

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Length: 21 pages
Date of creation: 31 Mar 2008
Handle: RePEc:pia:wpaper:50/2008
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