ESTONIAN ROAD TO EURO AREA – A STRUGGLE WITH INFLATION WITHIN THE CURRENCY BOARD SYSTEM

Dorota Zbierzchowska
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Dorota Zbierzchowska: College of social and media culture

Oeconomia Copernicana, 2010, vol. 1, issue 1, 25-42

Abstract: Estonia is an example of a country, which from the beginning of its transformation employed rigid course regime in the form of a currency board. After successful suppression of inflation in the first decade of transformation one could expect, that after joining the European Union and the ERMII system Estonia will soon become a member of the Euro area. However within the next few years of economic development Estonian economy could not fulfill the condition of stability of prices. Only in the time of the World Economic Crisis and Estonian great economic breakdown all criteria of convergence were satisfied. In January 2011 the country will become a member of the monetary union. The aim of this paper is to answer the question, whether processes of inflation in Estonian economy were conditioned by the presence of a rigid currency board system. One will examine here, whether there occurs - postulated in theory - convergence of inflation pace between a country employing a currency board system and a country with a reserve currency.

Keywords: Inflation; Currency Board System; Euro Adoption; Estonia (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:pes:ieroec:v:1:y:2010:i:1:p:25-42

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