Exchange Rate Strategies towards EMU for Accession Countries with Currency Boards

Margarita Katsimi

No 18, EUI-RSCAS Working Papers from European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS)

Abstract: This paper investigates the transition of the EU candidate countries with a currency board arrangement (CBA) to the euro-zone. The arguments for and against retaining a CBA while participating in the Exchange Rate Mechanism of the EU (ERMII) are discussed. Then, we show in the framework of a signalling model that abandoning a CBA and allowing the exchange rate to fluctuate within the bands of ERMII can signal to markets the sustainability of nominal convergence and, hence, diminish uncertainty in the pre-accession period and increase the probability of being accepted into the eurozone.

Keywords: international trade; EMU; enlargement (search for similar items in EconPapers)
Date: 2004-10-15
New Economics Papers: this item is included in nep-eec, nep-ifn, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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