Implications of EMU for Exchange Rate Policy in Central and Eastern Europe

January 1, 1999

Preview Citation

Format: Chicago

George Kopits. Implications of EMU for Exchange Rate Policy in Central and Eastern Europe, (USA: International Monetary Fund, 1999) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

In view of the requirements of Stage 2 of European Monetary Union (EMU) for accession to the European Union, this paper examines the desirability for, and the ability of, the lead candidates in Central and Eastern Europe to participate in the new exchange rate mechanism (ERM2) and eventually in EMU. For most of these countries the benefits are likely to outweigh the cost of participation. After successfully meeting the basic conditions (wage flexibility, prudent fiscal and monetary stance, financial system soundness) for ERM2, each candidate should be able to shadow the euro, with sufficient flexibility around the central rate, prior to formal participation. The paper concludes with a discussion of two policy dilemmas.

Subject: Currencies, Exchange rate arrangements, Exchange rate policy, Exchange rates, Financial services, Fiscal stance, Foreign exchange, Money, Short term interest rates

Keywords: Asia and Pacific, Central and Eastern Europe, Crawling peg, Currencies, Current account, Eastern Europe, Europe, Exchange rate arrangements, Exchange rate policy, Exchange rates, Hard currency, International monetary arrangements, Lead accession countries, Managed float, Nominal rate, Risk premium, Short term interest rates, Southeast Asia, Stabilization program, Transition economies, WP

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/009
Stock No:

WPIEA0091999
ISBN:

9781451842579
ISSN:

1018-5941

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