Europe as an optimum currency area: the experience of the Baltic countries

Christos Papazoglou, Dimitrios Sideris () and Orestis Tsagklas
Additional contact information
Christos Papazoglou: Bank of Greece
Dimitrios Sideris: Bank of Greece
Orestis Tsagklas: Panteion University

Economic Bulletin, 2016, issue 44, 35-46

Abstract: The key conclusions of the Optimum Currency Area (OCA) literature is that for a currency area to be successful, the benefits of joining should outweigh the costs that the loss of monetary policy tools entails for prospective member. To this end, a number of criteria need to be met to reduce the incidence and impact of asymmetric shocks. Moreover, if the criteria are not fulfilled ex ante, a strand of the literature argues that monetary integration itself will tend to promote the changes required so that the criteria hold ex post. This paper focuses on the case of the three Baltic countries (Estonia, Lithuania and Latvia). It shows that, before the crisis of 2008, the Baltic countries did converge on the euro area and met the OCA criteria; afterwards, however, the occurrence of significant asymmetric shocks led to divergence between these countries and the rest of the euro area. This conclusion supports the view that the convergence achieved pre-crisis was not enough to keep the flaws of the monetary union coming to light in the aftermath.

Keywords: Optimal currency area; Baltic countries; euro area (search for similar items in EconPapers)
JEL-codes: F15 F45 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bankofgreece.gr/BogEkdoseis/econbull201612.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bog:econbl:y:2016:i:44:p:35

Access Statistics for this article

Economic Bulletin is currently edited by Dimitris Malliaropulos

More articles in Economic Bulletin from Bank of Greece Contact information at EDIRC.
Bibliographic data for series maintained by Anastasios Rizos ().