Should the EMU Stop Enlarging?

Tanja Broz

Panoeconomicus, 2018, vol. 65, issue 4, 459-477

Abstract: The aim of this research is to assess what would happen with the business cycle synchronization in the Economic and Monetary Union (EMU), if all new EU member states introduced the euro. In addition, the paper aims to explore how business cycle correlations have evolved over time. The assumption is that, if business cycles in the EMU members are not correlated and the state of integration remains as it is, the ECB’s one-size-fits-all policy will require members to follow policies which are politically difficult to implement. Hence, we are analyzing whether the EMU should stop accepting new entrants in order to stop deteriorating mutual business cycle correlation. Results based on correlations of shocks between the EMU and individual countries and their sizes show that correlation of supply shocks would remain relatively high if all members introduced the euro, but low correlation of demand shocks, different sizes of shocks and transmission of shocks still remain as significant problems. Key words: Business cycle correlations, Supply and demand shocks, EMU, Enlargement. JEL: E32, F33. Da li bi Evropska monetarna unija treba da prestane da se proširuje? Cilj ovog istraživanja je da proceni šta će se desiti sa sinhronizacijom poslovnog ciklusa u Ekonomskoj i Monetarnoj Uniji (EMU), ako sve nove članice EU uvedu evro. Pored toga, cilj rada je istražiti kako su se korelacije poslovnog ciklusa razvijale tokom vremena. Pretpostavka je da, ako poslovni ciklusi u članovima EMU nisu u korelaciji i stanje integracije ostaje onakva kakva jeste, politika ECB da za sve primenjuje ista pravila će zahtevati od članova da prate pravila koje je politički teško implementirati. Stoga analiziramo da li EMU treba da prestane da prihvata nove članove kako bi zaustavio pogoršanje korelacije zajedničkog poslovnog ciklusa. Rezultati zasnovani na korelaciji šokova između EMU i pojedinačnih zemalja i njihovih veličina pokazuju da bi korelacija šokova ponude ostala relativno visoka ukoliko bi svi članovi uveli euro, ali niska korelacija šokova tražnje, različite veličine šokova i prenosa šokova i dalje ostaju značajan problem. Ključne reči: Korelacije poslovnog ciklusa, šokovi ponude i potražnje, EMU, proširenje.

Date: 2018
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