Macroeconomic stability as the condition for Bulgaria to join the euro area

Anna Mozdzierz ()
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Anna Mozdzierz: Cracow University of Economics, Poland

Equilibrium. Quarterly Journal of Economics and Economic Policy, 2019, vol. 14, issue 2, 295-315

Abstract: Research background: The subject of research is the macroeconomic situation of Bulgaria in the context of the country's preparations for joining the euro area. In 2018, the Bulgarian government approved a plan of preparations covering the period until the end of June 2019, which assumes that the country will join the ERM II mechanism in July 2019, and the euro area on 1 January 2022. Bulgaria meets four nominal convergence criteria regarding inflation, long-term interest rate, budget deficit and public debt. The national currency is pegged to the euro under the currency board arrangement. Despite this, the implementation of this optimistic scenario may be difficult because since the 2007 crisis, the European institutions pay more attention to macroeconomic stability and the sustainability of convergence. Purpose of the article: The aim of the article is to identify the factors destabilising macroeconomic equilibrium in Bulgaria, which are a potential obstacle to the adoption of the euro by Bulgaria on schedule. Methods: The research was based on the changes in selected macroeconomic indicators, as well as on the method used by the European Commission to detect macroeconomic imbalances. The observation and analysis covered the 2007–2018 period. Findings & Value added: The research results indicate that the low level of socio-economic convergence of Bulgaria and macroeconomic imbalances may delay its membership in the monetary union. Therefore, while respecting the country's aspirations to join the euro area, one cannot ignore the risk of another destabilisation of the euro area.

Keywords: macroeconomic equilibrium; macroeconomic stability monetary union; convergence criteria (search for similar items in EconPapers)
JEL-codes: E61 E63 F33 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:pes:ierequ:v:14:y:2019:i:2:p:295-315

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