Alternative Paths Towards EMU: Lessons from an Expanded Mundell-Fleming Model for the Accession Countries

Lucio Vinhas de Souza and Elisabeth Ledrut

No 1132, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: A small expectations-expanded "Mundell-Fleming" model is built for the European Union Accession Countries and estimated to assess the optimality of different exchange rate regimes (a peg and a float) through a simple welfare function. Floating appears as the best option for most of the countries in our sample, and this conclusion is robust to changes in the weights of the welfare function. The "shock absorbing" qualities of the regimes for different types of innovations is assessed via a VAR and a structural model, and here again the float seems to outperform a harder regime, in the emergence of temporary shocks.

Keywords: Euro; Enlargement; Transition Economies; Exchange Rate Regimes; Mundell-Fleming Models (search for similar items in EconPapers)
JEL-codes: E52 E61 F02 P33 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1132

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