The purpose of this paper is to survey the issue of real convergence in Central and Eastern Europe, based our approach on the literature review in the field and intended to develop a comparative ...approach of the main criteria of real convergence. We comparatively study Romania’s situation face to European Union Member States that did not adhere until now to ERM Exchange Rate Mechanism II and that do not benefit of special opt-outs stipulations - Czech Republic, Hungary, Poland and Bulgaria. The challenges of the paper consisted in identification and choose of the criteria which properly characterize the real convergence issue of the national economies. This approach is imposed by the widespread concept of real convergence and its different meanings or measurement manners.
When eight postcommunist states became European Union members in 2004, they committed to eventually joining the euro zone. But by 2005 the states' diverging preferences on pursuing rapid euro ...adoption had split them into 'pacesetters' (the Baltic states, Slovenia, and Slovakia) and 'laggards' (Poland, the Czech Republic, and Hungary). This contrasts starkly with their previous agreement on the desirability of EU membership. Why did the conditionality of Maastricht prove less potent than that of Copenhagen? First, I argue that a domestic cost-benefit analysis turned the smaller new member states into pacesetters. Second, I argue that Maastricht conditionality has not only allowed but encouraged the laggards to further delay their entry. By making it possible for new member states to delay entry, by increasing the difficulty of the entry conditions, and by displaying internal problems undermining the euro zone's legitimacy and attraction, EU actors discouraged the laggards from making euro-zone entry a domestic priority.
Full text
Available for:
BFBNIB, NUK, ODKLJ, PILJ, SAZU, UL, UM, UPUK
I estimate a two-equation system on the Czech koruna–euro exchange rate and order flow at hourly frequency with transactions data from the Reuters Spot Matching market in the second half of 2002, ...during which the Czech National Bank intervened to stem the appreciation of the koruna. I find a significant impact of order flow on the exchange rate, equal to 7.6 basis points per €10 million, of which 80% persists throughout the day. The news of intervention increases the price impact of order flow by 3.9 basis points per €10 million. The order flow equation yields inconclusive results.
Full text
Available for:
GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
The economies of Poland and Sweden are quite different, but the Polish and Swedish foreign exchange markets are similar. The main difference between them is the size of turnover, the Swedish market ...is more than five times larger than the Polish one. The aim of the paper is to identify factors determining the relationship between exchange rates volatility of the Polish zloty, Swedish krona, U.S. dollar and euro in the context of the development of the foreign exchange markets. The strong correlation of the EUR/USD exchange rate with the USD/PLN and USD/SEK exchange rates can be explained by the transactional and currency structures of the Polish and Swedish markets.
Full text
Available for:
GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
We examine the daily exchange rate dynamics in selected new EU member states (Czech Republic, Hungary, Poland, Romania, and Slovakia) using GARCH and TARCH models between 1999 and 2006. Despite these ...countries’ adopted inflation targeting regime, they occasionally tried to manage their exchange rates. We find that the low credibility of exchange rate management implied higher volatility of exchange rates when it substantially deviated from the implicit target rates for all countries. Finally, we find significant asymmetric effects of the volatility of exchange rates in all analyzed countries.
Full text
Available for:
GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
A prominent specialist on economic developments in the former Soviet Union and Central and Eastern European (CEE) countries examines the ways in which the global financial crisis of 2008-2010 has ...impacted the economies of the 10 new eastern member states of the European Union (CEE-10). The author assesses the multiple preconditions of the crisis (e.g., excessive current account deficits, large foreign debt, inadequate currency reserves, immense credit expansion, rising inflation and real estate prices) as well as the rapid financial adjustments that had to be undertaken to overcome it (e.g., current account rebalancing, reducing budget deficits, pension and fiscal reform). He devotes considerable attention to the key issue of how the differences in exchange rate policies in these countries affected their abilities to respond to the crisis and outlines measures that should be implemented to enhance the crisis management capability of non-eurozone states relying on currency boards or floating exchange rates.
Full text
Available for:
BFBNIB, NUK, PILJ, SAZU, UL, UM, UPUK
The process of preparation and adoption of the European single currency is one of the most important challenges that Romania has to face in the first decade as a full time member of the European ...Union. This process will test both the political and the administrative capacity, requiring very clear programs for the adaptation of European regulations and directives that will ensure real and nominal convergence. This process will surely prove to be a difficult one and it will bring a high degree of pressure upon the economic system in general. The worldwide financial crisis is making the process of single European currency adoption even more difficult for Romania. Although its effects are not directly felt in Romania, the disorder created within international markets can easily transform the management of economic and currency politics into an insecure and extremely difficult task.
The pathway of the new member states towards the euro area was stopped, but not modified by the current world economic crisis. Their inflation declined but the fiscal status suffered. On the verge of ...the financial crisis, the European Central Bank overruled the Central and Eastern European member states' intentions for an earlier adoption of the euro, requiring compliance with the Maastricht criteria. The objective of this paper is to analyze the main proposed solutions and to draw attention on the most suitable ones in keeping with the particular features of these countries. Our conclusion is that fast results on the euro adoption will definitely depend on the fiscal consolidation, the soundness of global economic rehabilitation, the capital availability, and the domestic policies. The nature of the approached problems and the authors' experience recommend this study, both for researchers and practitioners.
This paper is a review of some of the challenges for the monetary authorities in countries whichadopted an inflation targeting strategy, and which are also intending to adopt Euro. Both the ...increasingmobility of capital flows and the preparations for entering ERM II are constraints for such a monetarystrategy. Since September 2008, the financial crisis, having burst into the developed countries, has alsoaffected the Central and Eastern Europe countries, and this phenomenon represents another challenge for themonetary authorities.
In this paper we discuss the estimation and methodology of the real equilibrium exchange rate partial equilibrium models and analyse to what extent the resulting estimates are applicable for setting ...the central parity prior to ERM II entry in the New EU Member States. Given the uncertainty surrounding the estimates, we argue that they are informative in the sign rather than the size of the misalignment of the exchange rate, but may still serve as useful consistency checks for the decision on the setting of the central parity. We argue that policy makers should consider the estimates in their decision-making only if the real exchange rate is substantially misaligned.
PDF
