ERM II Membership - the View of the Accession Countries
Lubos Komarek (lubos.komarek@cnb.cz) and
Roman Horvath
Working Papers from Czech National Bank, Research and Statistics Department
Abstract:
With EU accession looming, a new chapter has been opened in the debate about the candidate countries' exchange rate strategies. A heated discussion has arisen in relation to ERM2 membership. The experience of the present eurozone members with ERM/ERM2 membership shows that none of them faced a significant challenge in the two-year 'evaluation' period in terms of the exchange rate stability convergence criterion. This could also be attributable to the stability policies prescribed by the Maastricht Treaty. However, for catching-up countries in the run-up to joining the eurozone, given the existing functioning of the mechanism, the ERM2 appears be of little help for ensuring exchange rate stability. The mechanism should be viewed rather as a tool for 'persuading' the markets of the appropriateness of the euro-locking rate. Since the Maastricht rules do not allow downward adjustment of the central parity within the ERM2 for two years before introduction of the euro, the authorities should be familiar with the preferred real exchange rate path prior to entering the mechanism. We conclude that countries could face large costs if they fail to do so.
Keywords: EU/eurozone; convergence; exchange rate; transition. (search for similar items in EconPapers)
JEL-codes: E32 E52 E58 F33 F42 (search for similar items in EconPapers)
Date: 2003-12
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-tra
References: Add references at CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
https://www.cnb.cz/export/sites/cnb/en/economic-re ... cnb_wp/wp11-2003.pdf
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:cnb:wpaper:2003/11
Access Statistics for this paper
More papers in Working Papers from Czech National Bank, Research and Statistics Department Contact information at EDIRC.
Bibliographic data for series maintained by Tomas Karhanek (tomas.karhanek@cnb.cz).