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EMU strategies for new Member States: the role of Exchange Rate Mechanism II

Theodoros Papaspyrou

Economic Bulletin, 2004, issue 23, 7-25

Abstract: This paper examines the role of ERM II in the convergence effort of the new Member States, against the background of past convergence experience and in the light of EU rules for economic and monetary policy. Key aspects of the mechanism are analysed, including the appropriate timing and duration of participation in ERM II, intervention in the foreign exchange markets to defend central rates, fiscal adjustment as well as exit strategies from existing regimes. It emerges from the analysis that ERM II rules are flexible enough to accommodate a number of new Member States’ exchange rate regimes and that both exchange-rate-based monetary regimes as well as inflation targeting regimes can lead to a successful outcome, if accompanied by sound economic and fiscal policies.

Keywords: EU enlargement; EMU; ERM II (search for similar items in EconPapers)
JEL-codes: E52 E61 F32 (search for similar items in EconPapers)
Date: 2004
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