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Exchange Rate Regimes and the Nominal Convergence

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  • Mateusz Szczurek

Abstract

The paper examines theoretical literature, recent EMU accession examples, and current CEECs performance in search of the optimal currency regime for meeting the Maastricht criteria. Currency board arrangements seems to provide the fastest convergence. For other regimes, the markets may have theoretical and historical reasons to believe in the government's temptation to devalue on the ERM-2 entry. The government should announce the final date, and, possibly indicate the final exchange rate for the regime switch to avoid excessive currency and yield volatility. It should also underscore the central bank’s and EU authorities importance (even if non-existent) in the parity setting process to avoid excessive domestic debt inflation premium ahead of the accession. Recent experience shows that it will be easy to get rid of the remaining influence of cross rates on CEECs exchange rates.

Suggested Citation

  • Mateusz Szczurek, 2003. "Exchange Rate Regimes and the Nominal Convergence," CASE Network Studies and Analyses 0266, CASE-Center for Social and Economic Research.
  • Handle: RePEc:sec:cnstan:0266
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    File URL: http://www.case-research.eu/upload/publikacja_plik/1671270_266.pdf
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    References listed on IDEAS

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    4. Robert P Flood & Jagdeep S. Bhandari & Pierre-Richard Agénor, 1991. "Speculative Attacks and Models of Balance of Payments Crises," IMF Working Papers 91/99, International Monetary Fund.
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    6. Smith, Gregor W & Smith, R Todd, 1990. "Stochastic Process Switching and the Return to Gold, 1925," Economic Journal, Royal Economic Society, vol. 100(399), pages 164-175, March.
    7. Kenneth A. Froot & Kenneth Rogoff, 1991. "The EMS, the EMU, and the Transition to a Common Currency," NBER Chapters,in: NBER Macroeconomics Annual 1991, Volume 6, pages 269-328 National Bureau of Economic Research, Inc.
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    9. Buiter, Willem H. & Grafe, Clemens, 2002. "Anchor, Float or Abandon Ship: Exchange Rate Regimes for Accession Countries," CEPR Discussion Papers 3184, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Marek Dabrowski, 2005. "A Strategy for EMU Enlargement," CASE Network Studies and Analyses 0290, CASE-Center for Social and Economic Research.
    2. Michal Gorzelak, 2004. "Fiscal Costs of Delaying the EMU Accession - Medium Term Fiscal Projection for Selected New EU Members," CASE Network Studies and Analyses 0277, CASE-Center for Social and Economic Research.

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