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Impacts of Financial Crisis on the Euro Introduction in the Czech Republic

Mojmir Helisek ()

ACTA VSFS, 2011, vol. 5, issue 3, 220-240

Abstract: This article deals with the issue of how the financial crisis and the economic recession influenced readiness of the Czech Republic to adopt the euro. Deficiency of the public finance has deepened and catch-up of the euro area price level has slowed down. The financial crisis and the recession have therefore complicated adoption of the euro and have delayed it. As the recession goes to its end, fulfilment of both criteria is improving. Besides, the article covers the question whether the financial crisis and the recession have influenced the expected benefits of the euro adoption. The interconnection of the Czech economy with the euro area is examined, as well as the need of a stable exchange rate. The interconnection is strong and increasing. The long-term appreciation of the crown exchange rate reduces competitiveness of Czech exporters. In the case of the euro adoption, the trade relationships would be more stable than with the crown. The weighted variation coefficient expressing volatility of exchange rates showed with the crown existence (during 2007 – 2010) the value of 5.92%, with the crown replaced by the euro it would be only 2.68%.

Keywords: euro; euro area; euro area enlargement; maastricht criteria; nominal and real convergence; exchange rate stability; excessive deficit procedure; exchange rate volatility (search for similar items in EconPapers)
Date: 2011
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Handle: RePEc:prf:journl:v:5:y:2011:i:3:p:220-240