Exchange Rate Regimes and Supply Shocks Asymmetry: The Case of the Accession Countries

Mathilde Maurel, Laurence Boone and Jan Babetski
Authors registered in the RePEc Author Service: Jan Babecký

No 3408, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper reviews the pros and cons of an early EU enlargement towards Central and Eastern European Countries (CEECs hereafter). First, the Maastricht criteria, which cannot be literally assessed during the catching up process, but that nevertheless mirror the huge efforts undertaken in order to (i) stabilise the economies, (ii) converge towards the EU, and then (iii) participate into the EMU, are analysed. Second, real convergence is observed to occur at different rates, depending upon the initial conditions faced and the productivity gains realised by each country. Third, computing the correlation of demand and supply shocks in a wide sample of Euro countries and the CEECs, gives some indication of the similarity of the business cycles and economic structures of the CEECs on the one hand, and the EU on the other. Yet, we argue that looking at static correlation only (averaged over the last decade) is too simplistic, as the transition process will blur these averages. Using the Kalman filter, we are able to compute time varying correlation, hence differentiating between the transition and the most recent period. Our results emphasise an ongoing process of demand shocks convergence, but supply shocks divergence. Various exchange rate strategies are then discussed.

Keywords: Exchange rate regimes; Kalman filter; Eu enlargement; OCA (optimal currency area) criteria (search for similar items in EconPapers)
JEL-codes: E32 F30 F42 (search for similar items in EconPapers)
Date: 2002-06
New Economics Papers: this item is included in nep-cba, nep-eec, nep-ifn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (46)

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Related works:
Working Paper: Exchange Rate Regimes and Supply Shocks Asymmetry: the Case of the Accession Countries (2022)
Working Paper: Exchange Rate Regimes and Supply Shocks Asymmetry: the Case of the Accession Countries (2022)
Working Paper: Exchange Rate Regimes and Supply Shocks Asymmetry: the Case of the Accession Countries (2004)
Working Paper: Exchange Rate Regimes and Supply Shocks Asymmetry: the Case of the Accession Countries (2004)
Working Paper: Exchange Rate Regimes and Supply Shocks Asymmetry: the Case of the Accession Countries (2003)
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