Monetary Convergence of the EU Candidates to the Euro: A Theoretical Framework and Policy Implications

Lucjan T. Orlowski ()

Macroeconomics from EconWPA

Abstract: A flexible approach to direct inflation targeting is a viable monetary policy choice for transition economies that is believed to facilitate both the economic transition and the monetary convergence to the euro. Following this assumption, an analytical model investigating the link between the inflation process and monetary variables in transition economies is advanced in this study. The empirical testing is conducted for Poland, the Czech Republic and Hungary. The analysis recommends that the monetary convergence begins with inflation targeting and concludes with a full-fledged euroization. It further advocates the application of flexible benchmarks of monetary convergence that would accommodate various non-monetary factors affecting inflation in transition economies.

Keywords: transition economies; European Union candidate countries; inflation targeting; inflation targeting; monetary convergence (search for similar items in EconPapers)
JEL-codes: E32 E52 P33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2005-01-28
Note: Type of Document - pdf; pages: 32
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0501032

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