This paper estimates the exchange market pressure in four Central European countries which are also new member of the European Union - Czech Republic, Hungary, Poland and Slovenia. As all new ...EU-member countries are supposed to join the European Economic and Monetary Union soon, they must pay attention on fulfilling of all convergence criteria. One of the criterions deals with exchange rate stability and is associated with membership in the Exchange Rate Mechanism II. Estimation and analysis of exchange market pressure are extremely important since almost all new EUmembers will be forced to switch their relatively flexible exchange rate regime to the ERM II which is considered as quasifixed. This paper reveals a significance of exchange market pressure in all types of exchange regime arrangement in all countries analyzed. The paper concludes that exchange market pressure achieved the highest level in fixed pegs regimes and the volatility of exchange market pressure was lowest in the floating regimes.
The actual preparation and adoption of the euro is, for Romania, the most important challenge of the first decade after its accession at the EU. It puts to the test the policy and administrative ...capacity to conceive and implement a coherent program of m
In the course of exchange rate development history of the countries taking part and evaluated in ERM or ERM II before they entered the euro-area there was no depreciating evolution with a trend to ...currency crisis at all. Fundamental indicators of these economies, partly owing to the compliance with other Maastricht criteria, do not induce devaluation expectancions of investors. However, there is a danger in two other lines. Firstly there is the possibility of so called pure contagion, secondly there are specifics connected directly with taking part in ERM II (wrong configuration of the central parity, appreciating exchange rate overshooting or advancing the date of the euro conversion). The second generation models of currency crisis admits the risk of crisis even without an outstanding decline of fundamental indicators. Taking part of exchange rate in ERM II is a suitable application of the model. Under specific conditions, when taking part in ERM II should trend to the compliance with the exchange rate convergency criterion at the same time, there is a small expectancy of a speculative attack success.
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.
Our study evaluates the trade-off between real and nominal convergence in transition countries relating European integration (case of Romania). The potential conflict between Maastricht criteria and ...the possibility to obtain a faster real convergence with the European Union countries is explained with Ballassa-Samuelson effect. In addition, according this effect, we study the monetary policy regimes for Romanian authorities in perspective of the future admittance in Exchange Rate Mechanism II (ERM II)
This paper investigates the real-time effects of foreign exchange intervention using official intraday intervention data provided by the Danish central bank. Denmark is currently pursuing an active ...intervention policy under the provisions of the Exchange Rate Mechanism (ERM II) and intervenes on a discretionary basis when considered necessary. Prior participation in ERM II is a requirement for adoption of the Euro. Therefore, our study is of particular relevance for the new European Union member states that are either currently participating in ERM II or expected to do so at a later date as well as for Denmark. Our analysis employs the two-step weighted least squares estimation procedure of Andersen, Bollerslev, Diebold and Vega (2003) and an array of robustness tests. We find that intervention exerts a statistically and economically significant influence on exchange rate returns when the direction of intervention is consistent with fundamentals and intervention is carried out during a period of high exchange rate volatility. We also show that the exchange rate does not adjust instantaneously to the unannounced and discretionary interventions under study. We conclude that intervention can be an important short-term policy instrument for exchange rate management.
This article analyzes the main issues for monetary policy in new EU member states before their euro adoption. These are typically rooted in the challenge of fulfilling concurrently of the Maastricht ...inflation and exchange rate criterion, as these countries are experiencing equilibrium real exchange rate appreciation. In this article we first distinguish between the wording, written interpretation and “revealed” interpretation of the inflation and exchange rate criteria. Then we discuss the options for monetary policy in the period of fulfilment of these criteria in terms of its transparency, its continuity with the previous monetary policy regime, the choice of central parity for the ERM II, the setting of the fluctuation bandwidth, the probability of fulfilment of both criteria and the impact on economic stability.
This article analyzes the main issues for monetary policy in new EU member states before their euro adoption. These are typically rooted in the challenge of fulfilling concurrently of the Maastricht ...inflation and exchange rate criterion, as these countries are experiencing equilibrium real exchange rate appreciation. In this article we first distinguish between the wording, written interpretation and “revealed” interpretation of the inflation and exchange rate criteria. Then we discuss the options for monetary policy in the period of fulfilment of these criteria in terms of its transparency, its continuity with the previous monetary policy regime, the choice of central parity for the ERM II, the setting of the fluctuation bandwidth, the probability of fulfilment of both criteria and the impact on economic stability.
This paper addresses issues related to the choice of the central parity for Poland’s prospective ERM II membership. It discusses the relevance of different concepts of equilibrium exchange rate in ...the determination of the central parity and, on the basis of recent studies, it provides a tentative assessment of the equilibrium exchange rate of the Polish zloty. Risks resulting from a potential exchange rate misalignment are also analysed. Finally, in the context of the choice of the central parity, the paper gives insights into developments in the Polish labour market and factors behind the persistently high unemployment rate.
The objective of this paper is twofold. First, we provide an introduction on estimation and methodology of the real equilibrium exchange rate. Second, we discuss to what extent are these estimates ...applicable for setting the central parity. Given the uncertainty surrounding the estimates, they are informative in the sign rather than the size of the misalignment of exchange rate, but may serve as useful consistency checks for the decision about setting the central parity. We argue that policy makers shall consider the estimates in their decisionmaking only if the real exchange rate is substantially misaligned (i.e. more than 10% as a rule of thumb).
