Faculty and Research | London Business School - …facultyresearch.london.edu/docs/dp19.pdfJVEQI[SVO SJ EGGIWWMSR XS XLI )9 ERH )19 ERH [MXLMR XLI MRWXMXYXMSREP GSRWXVEMRXW WIX F]

CENTRE FOR NEW AND EMERGING MARKETS

Discussion Paper Series Number 19

IS THERE A CASE FOR UNILATERAL EUROISATION? EVIDENCE FROM BULGARIA, HUNGARY,

THE CZECH REPUBLIC AND POLAND

Maurizio Michael Habib University of Rome “La Sapienza”

June 01

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1

Abstract:

8LMW TETIV HMWGYWWIW XLI MWWYI SJ YRMPEXIVEP IYVSMWEXMSR r XLI YRMPEXIVEP EHSTXMSR SJ XLI IYVS EW

PIKEP XIRHIV � MR JSYV 'IRXVEP ERH )EWXIVR )YVSTIER 'SYRXVMIW� 8LI WEQTPI GSRWMWXW SJ XLI XLVII

JVSRX�VYRRIVW r XLI 'ÎGL 6ITYFPMG� ,YRKEV] ERH 4SPERH r ERH E VYRRIV�YT r &YPKEVME � MR XLI

EGGIWWMSR XS XLI )YVSTIER 9RMSR �)9� ERH )GSRSQMG 1SRIXEV] 9RMSR �)19��

% TVIPMQMREV] WYVZI] SJ XLI GYVVIRX JM\IH�ZIVWYW�JPI\MFPI I\GLERKI VEXIW HIFEXI WLS[W XLEX XLI

EHSTXMSR SJ ERSXLIV GSYRXV]W GYVVIRG] MRZSPZIW WTIGMJMG GSWXW ERH FIRIJMXW XLEX EVI FI]SRH XLI

WGSTI SJ XLI GPEWWMGEP 3TXMQYQ 'YVVIRG] %VIE �3'%� XLISV]� -R SVHIV XS IZEPYEXI XLI GEWI JSV

YRMPEXIVEP IYVSMWEXMSR� XLI I\EQMREXMSR SJ XLI WXERHEVH 3'% GVMXIVME LEW FIIR MRXIKVEXIH [MXL ER

EREP]WMW SJ ER EHHMXMSREP WIX SJ GVMXIVME ERH [MXL ER IZEPYEXMSR SJ WIMKRMSVEKI � [LMGL MW JSVIKSRI

SRGI XLEX E GSYRXV] EFERHSRW MXW GYVVIRG] r ERH VMWO TVIQME r [LMGL EVI I\TIGXIH XS JEPP EJXIV

IYVSMWEXMSR� 1SVISZIV� ER IEVP] EHSTXMSR SJ XLI IYVS LEW XS FI EWWIWWIH MR XLI TSPMXMGEP

JVEQI[SVO SJ EGGIWWMSR XS XLI )9 ERH )19� ERH [MXLMR XLI MRWXMXYXMSREP GSRWXVEMRXW WIX F] XLI

1EEWXVMGL 8VIEX]� 3R XLMW VIWTIGX� )9 TSPMG]�QEOIVW VIZIEPIH LSWXMPMX] XS[EVHW E L]TSXLIXMGEP

HIGMWMSR XS IYVSMWI FIJSVI IRXIVMRK XLI )9 ERH )19� -R GSRGPYWMSR� ER IEVP] W[MXGL XS XLI IYVS

MW TVSFEFP] XSS VMWO] E GLSMGI JSV XLI 'ÎGL 6ITYFPMG ERH ,YRKEV]� -R 4SPERH XLI FEPERGI SJ

GSWXW ERH FIRIJMXW SJ YRMPEXIVEP IYVSMWEXMSR MW YRGIVXEMR� -R &YPKEVME� YRMPEXIVEP IYVSMWEXMSR GSYPH

FVMRK E RIX KEMR� WMRGI MX [SYPH VITVIWIRX ER DMRWYVERGI EKEMRWX WLSVXJEPPW SJ GVIHMFMPMX]�

2

NON-TECHNICAL SUMMARY

9RMPEXIVEP IYVSMWEXMSR MW E GSYRXV]W XSXEP VITPEGIQIRX SJ MXW HSQIWXMG GYVVIRG] F] XLI IYVS�

YRMPEXIVEPP] EHSTXIH EW XLI SRP] PIKEP XIRHIV� ;L] WLSYPH E GSYRXV] WYVVIRHIV MXW QSRIXEV]

WSZIVIMKRX] XS ERSXLIV GSYRXV] SV ERSXLIV GYVVIRG] EVIE# &IGEYWI E GSYRXV] GERRSX EX XLI WEQI

XMQI LEZI JYPP JMRERGMEP MRXIKVEXMSR� I\GLERKI VEXI WXEFMPMX] ERH QSRIXEV] TSPMG] MRHITIRHIRGI�

-R WQEPP STIR IGSRSQMIW� XLI JMVWX X[S KSEPW SJXIR EVI QSVI MQTSVXERX XLER XLI XLMVH SRI�

8LI GERHMHEXI GSYRXVMIW XS EGGIWWMSR XS XLI )YVSTIER 9RMSR �)9� EVI I\TIGXIH XS EHSTX XLI IYVS

MR HYI GSYVWI� EJXIV LEZMRK JYPJMPPIH XLI 1EEWXVMGLX GSRZIVKIRGI GVMXIVME� ;L] WLSYPH 'IRXVEP ERH

)EWXIVR )YVSTIER 'SYRXVMIW �'))'W� EFERHSR XLIMV GYVVIRGMIW JSV XLI IYVS FIJSVI NSMRMRK XLI

)YVSTIER 9RMSR ERH )GSRSQMG 1SRIXEV] 9RMSR �)19�# 8LI QEMR VIEWSR MW XLEX ER IEVP]

EHSTXMSR SJ XLI IYVS [SYPH [EVH SJJ XLI HERKIV SJ GYVVIRG] GVMWIW HYVMRK XLI ETTVSEGL XS )19�

&] IPMQMREXMRK XLI HSQIWXMG GYVVIRG]� ER IYVSMWMRK GSYRXV] [SYPH KIX VMH SJ XLI TVSFPIQ SJ

RSQMREP I\GLERKI VEXI ZSPEXMPMX] ERH [SYPH IPMQMREXI GYVVIRG] VMWO� %WWYQMRK XLEX XLI HIJEYPX

VMWO VIQEMRW YRGLERKIH� E PS[IV GYVVIRG] VMWO [MPP FVMRK EFSYX PS[IV MRXIVIWX VEXIW� [LMGL� MR

XYVR� [MPP JSWXIV MRZIWXQIRX KVS[XL ERH VIHYGI XLI WIVZMGI SJ I\XIVREP ERH TYFPMG HIFX�

9RMPEXIVEP IYVSMWEXMSR IRXEMPW WSQI GSWXW� XSS� 8LI STXMQYQ GYVVIRG] EVIE PMXIVEXYVI SJJIVW XLI

XLISVIXMGEP JVEQI[SVO XS IZEPYEXI XLI GSWXW SJ XLI PSWW SJ MRHITIRHIRX QSRIXEV] ERH I\GLERKI

VEXI TSPMGMIW� 2IZIVXLIPIWW� XLI EREP]WMW SJ GSWXW ERH FIRIJMXW SJ IYVSMWEXMSR GERRSX VIQEMR MRWMHI

XLI FSYRHEVMIW SJ XLI XVEHMXMSREP STXMQYQ GYVVIRG] EVIE XLISV]� 3R XLI SRI LERH� XLI VIHYGXMSR

MR VMWO TVIQME ERH XLI I\MWXIRGI SJ TEVXMGYPEV MRMXMEP GSRHMXMSRW � WYGL EW XLI RIIH SJ MQTSVX

QSRIXEV] WXEFMPMX] SV XLI TVIWIRGI SJ E PEVKI WLEVI SJ JSVIMKR�GYVVIRG]�HIRSQMREXIH EWWIXW MR XLI

IGSRSQ] [LMGL TVIZIRXW ER IJJIGXMZI YWI SJ I\GLERKI VEXI TSPMGMIW r GSYPH GLERKI XLI JMREP

FEPERGI MR JEZSYV SJ ER IEVP] EHSTXMSR SJ XLI IYVS� 3R XLI SXLIV LERH� E GSYRXV] XLEX

YRMPEXIVEPP] EHSTXW E JSVIMKR GYVVIRG] EW PIKEP XIRHIV JEGIW XLI PSWW SJ WIMKRMSVEKI VIZIRYIW�

3R FEPERGI� YRMPEXIVEP IYVSMWEXMSR MW E VMWO] WXVEXIK] [MXL QSVI FMRHMRK GSRWXVEMRXW ERH QSVI

I\TIGXIH FIRIJMXW GSQTEVIH [MXL ER EPXIVREXMZI I\GLERKI VEXI EVVERKIQIRX� -X RIIHW E WXVSRK

TSPMXMGEP GSQQMXQIRX XS JMWGEP ERH PEFSYV QEVOIX VIJSVQW MR SVHIV XS [SVO� 8LIWI VIJSVQW [MPP

QEOI IYVSMWEXMSR WYWXEMREFPI MR XLI PSRK�XIVQ� WMRGI XLI IGSRSQ] GSYPH [MXLWXERH XLI PEGO SJ

I\GLERKI VEXI JPI\MFMPMX] ERH XLI PSWW SJ QSRIXEV] TSPMG] MRHITIRHIRGI [MXLSYX MRGYVVMRK PEVKI

GSWXW� -J IGSRSQMG VIJSVQW [IVI XS JEMP� IYVSMWEXMSR GSYPH RSX EZSMH GETMXEP JPS[ VIZIVWEPW ERH

3

[SYPH RSX VIHYGI XLI GSWX SJ FSVVS[MRK SR XLI MRXIVREXMSREP QEVOIX� -RXIVIWX VEXIW GSYPH WSEV

ERH XLI PEWX PMJI�NEGOIX XLEX [SYPH VIQEMR XS EZSMH VIGIWWMSR [SYPH FI ER MRGVIEWI MR JMWGEP

WTIRHMRK� -J XLI TYFPMG HIFX VER SYX SJ GSRXVSP XLI QSWX PMOIP] VIWYPX [SYPH FI HIJEYPX� -J VIJSVQW

JEMPIH� XLI I\TIGXIH GSWXW SJ IYVSMWEXMSR [SYPH TVSFEFP] FI PEVKIV XLER MR EPXIVREXMZI I\GLERKI

VEXI VIKMQIW�

8LMW TETIV XEOIW MRXS EGGSYRX EPP XLI EFSZI QIRXMSRIH JEGXSVW r STXMQYQ GYVVIRG] EVIE GVMXIVME�

KEMR SJ GVIHMFMPMX]� PSWW SJ WIMKRMSVEKI� TSXIRXMEP VIHYGXMSR MR VMWO TVIQME � MR SVHIV XS IZEPYEXI

XLI ETTVSTVMEXIRIWW SJ YRMPEXIVEP IYVSMWEXMSR MR JSYV 'IRXVEP ERH )EWXIVR )YVSTIER 'SYRXVMIW�

&YPKEVME� XLI 'ÎGL 6ITYFPMG� ,YRKEV] ERH 4SPERH �'))'�� 8LI QEMR GSRGPYWMSR MW XLEX XLI

GEWI JSV YRMPEXIVEP IYVSMWEXMSR MW [IEO MR XLI 'ÎGL 6ITYFPMG ERH MR ,YRKEV]� )ZIR XLSYKL XLIWI

X[S GSYRXVMIW HS WEXMWJ] XLI STXMQYQ GYVVIRG] EVIE GVMXIVME JSV EHSTXMRK XLI IYVS� XLI] HS RSX

RIIH XS MQTSVX QSRIXEV] WXEFMPMX] XS KEMR ERXM�MRJPEXMSREV] GVIHMFMPMX]� HS RSX TVIWIRX E LMKL

HIKVII SJ TEVXMEP YRSJJMGMEP HSPPEVMWEXMSR�IYVSMWEXMSR ERH WLSYPH RSX KIX ZIV] PEVKI KEMRW MR XIVQW

SJ VIHYGXMSR MR VMWO TVIQME� ,YRKEVMER EYXLSVMXMIW GSYPH GSRWMHIV YRMPEXIVEP IYVSMWEXMSR MJ

,YRKEV] JEMPIH XS NSMR XLI )9 MR XLI JMVWX VSYRH SJ IRPEVKIQIRX ERH MRXIVIWX VEXIW WLSYPH HMZIVKI

JVSQ )9 WXERHEVHW MR XLI QIHMYQ�XIVQ�

-R 4SPERH� XLI GEWI JSV YRMPEXIVEP IYVSMWEXMSR MW VEXLIV QM\IH� 8LI VIEP WMHI SJ XLI IGSRSQ] HSIW

RSX WIIQ VIEH] JSV XLI GLEPPIRKIW SJ IYVSMWEXMSR� 4SPERH MW E QIHMYQ�WMÎ VIPEXMZIP] GPSWIH

IGSRSQ]� 8LMW QIERW XLEX MRHITIRHIRX QSRIXEV] ERH I\GLERKI VEXI TSPMGMIW GSYPH LEZI

XVERWMXSV] IJJIGXW SR XLI VIPEXMZI TVMGI SJ XVEHIH ERH RSR�XVEHIH KSSHW ERH GSYPH IJJIGXMZIP] FI

YWIH XS WQSSXL XLI IGSRSQMG G]GPI� -R EHHMXMSR� XLIVI MW WSQI IZMHIRGI SJ VMKMHMXMIW MR XLI PEFSYV

QEVOIX� VMKMHMXMIW XLEX QEOI MX PSRKIV ERH QSVI HMJJMGYPX XLI IZIRXYEP EHNYWXQIRX SJ XLI IGSRSQ]

XS I\XIVREP WLSGOW� 2IZIVXLIPIWW� 4SPERH GSYPH PEVKIP] FIRIJMX JVSQ XLI VIHYGXMSR MR GYVVIRG]

VMWO F] EHSTXMRK XLI IYVS� -J XLI GSQQMXQIRX XS MQTPIQIRX PEFSYV QEVOIX VIJSVQW ERH XS

GSRXEMR JMWGEP HIJMGMXW [IVI WXVSRK� IYVSMWEXMSR MR 4SPERH GSYPH FI WYGGIWWJYP� SXLIV[MWI� MX GSYPH

XYVR SYX XS FI E GSWXP] HIGMWMSR�

3RP] &YPKEVME TVIWIRXW EPP XLI JEZSYVEFPI GSRHMXMSRW JSV ER IEVP] EHSTXMSR SJ XLI IYVS� 7S JEV�

XLI GYVVIRG] FSEVH TVSHYGIH XLI WEQI VIWYPXW [LMGL EVI I\TIGXIH JVSQ IYVSMWEXMSR� 2SRIXLIPIWW�

XLI GYVVIRG] FSEVH WYJJIVW EX PIEWX XS WSQI I\XIRX JVSQ XLI WEQI HVE[FEGOW SJ XVEHMXMSREP JM\IH

TIK EVVERKIQIRXW� %PP XLI KEMRW GSYPH UYMGOP] HMWETTIEV MJ XLI GVIHMFMPMX] SJ XLI TIK WLSYPH

JEPXIV� )YVSMWEXMSR [SYPH VITVIWIRX ER DMRWYVERGI EKEMRWX WLSVXJEPPW SJ GVIHMFMPMX]� ERH XLI GSWX SJ

XLI PSWW SJ WIMKRMSVEKI [SYPH VITVIWIRX XLI DMRWYVERGI TVIQMYQ�

4

*MREPP]� MX MW MQTSVXERX XS WXVIWW XLEX )9 TSPMG]�QEOIVW WXVSRKP] STTSWI ER IEVP] EHSTXMSR SJ XLI

IYVS MR GERHMHEXI GSYRXVMIW� *SV XLMW VIEWSR� YRMPEXIVEP IYVSMWEXMSR [SYPH IRXEMP E TSPMXMGEP GSWX

XLEX WLSYPH FI EHHIH XS XLI IGSRSQMG FEPERGI SJ GSWXW ERH FIRIJMXW� 8LI JEVXLIV XLI HEXI SJ

EGGIWWMSR XS XLI )9� XLI WQEPPIV XLI TSPMXMGEP GSWX VIPEXMZI XS XLI IGSRSQMG FIRIJMXW SJ

IYVSMWEXMSR� ERH XLI PEVKIV XLI MRXVMRWMG ZEPYI SJ WYGL ER STXMSR�

5

1. Introduction

9RMPEXIVEP IYVSMWEXMSR MW E GSYRXV]W XSXEP VITPEGIQIRX SJ MXW HSQIWXMG GYVVIRG] F] XLI IYVS�

YRMPEXIVEPP] EHSTXIH EW XLI SRP] PIKEP XIRHIV� ;L] WLSYPH E GSYRXV] WYVVIRHIV MXW QSRIXEV]

WSZIVIMKRX] XS ERSXLIV GSYRXV] SV ERSXLIV GYVVIRG] EVIE# &IGEYWI E GSYRXV] GERRSX EX XLI WEQI

XMQI LEZI JYPP JMRERGMEP MRXIKVEXMSR� I\GLERKI VEXI WXEFMPMX] ERH QSRIXEV] TSPMG] MRHITIRHIRGI�

-R WQEPP STIR IGSRSQMIW� XLI JMVWX X[S KSEPW SJXIR EVI QSVI MQTSVXERX XLER XLI XLMVH SRI�

8LI GERHMHEXI GSYRXVMIW XS EGGIWWMSR XS XLI )YVSTIER 9RMSR �)9� EVI I\TIGXIH XS EHSTX XLI IYVS

MR HYI GSYVWI� EJXIV LEZMRK JYPJMPPIH XLI 1EEWXVMGLX GSRZIVKIRGI GVMXIVME� ;L] WLSYPH 'IRXVEP ERH

)EWXIVR )YVSTIER 'SYRXVMIW �'))'W� EFERHSR XLIMV GYVVIRGMIW JSV XLI IYVS FIJSVI NSMRMRK XLI

)YVSTIER 9RMSR ERH )GSRSQMG 1SRIXEV] 9RMSR �)19�# 8LI QEMR VIEWSR MW XLEX ER IEVP]

EHSTXMSR SJ XLI IYVS [SYPH [EVH SJJ XLI HERKIV SJ GYVVIRG] GVMWIW HYVMRK XLI ETTVSEGL XS )19�

&] IPMQMREXMRK XLI HSQIWXMG GYVVIRG]� ER IYVSMWMRK GSYRXV] [SYPH KIX VMH SJ XLI TVSFPIQ SJ

RSQMREP I\GLERKI VEXI ZSPEXMPMX] ERH [SYPH IPMQMREXI GYVVIRG] VMWO� %WWYQMRK XLEX XLI HIJEYPX

VMWO VIQEMRW YRGLERKIH� E PS[IV GYVVIRG] VMWO [MPP FVMRK EFSYX PS[IV MRXIVIWX VEXIW� [LMGL� MR

XYVR� [MPP JSWXIV MRZIWXQIRX KVS[XL ERH VIHYGI XLI WIVZMGI SJ I\XIVREP ERH TYFPMG HIFX�

9RMPEXIVEP IYVSMWEXMSR IRXEMPW WSQI GSWXW� XSS� 8LI STXMQYQ GYVVIRG] EVIE PMXIVEXYVI SJJIVW XLI

XLISVIXMGEP JVEQI[SVO XS IZEPYEXI XLI GSWXW SJ XLI PSWW SJ MRHITIRHIRX QSRIXEV] ERH I\GLERKI

VEXI TSPMGMIW� 2IZIVXLIPIWW� XLI EREP]WMW SJ GSWXW ERH FIRIJMXW SJ IYVSMWEXMSR GERRSX VIQEMR MRWMHI

XLI FSYRHEVMIW SJ XLI XVEHMXMSREP STXMQYQ GYVVIRG] EVIE XLISV]� 3R XLI SRI LERH� XLI VIHYGXMSR

MR VMWO TVIQME ERH XLI I\MWXIRGI SJ TEVXMGYPEV MRMXMEP GSRHMXMSRW � WYGL EW XLI RIIH SJ MQTSVX

QSRIXEV] WXEFMPMX] SV XLI TVIWIRGI SJ E PEVKI WLEVI SJ JSVIMKR�GYVVIRG]�HIRSQMREXIH EWWIXW MR XLI

IGSRSQ] r GSYPH GLERKI XLI JMREP FEPERGI MR JEZSYV SJ ER IEVP] EHSTXMSR SJ XLI IYVS� 3R XLI

SXLIV LERH� E GSYRXV] XLEX YRMPEXIVEPP] EHSTXW E JSVIMKR GYVVIRG] EW PIKEP XIRHIV JEGIW XLI PSWW SJ

WIMKRMSVEKI VIZIRYIW� 8LMW TETIV [MPP XEOI MRXS EGGSYRX EPP XLI JEGXSVW QIRXMSRIH EFSZI MR SVHIV

XS IZEPYEXI XLI ETTVSTVMEXIRIWW SJ YRMPEXIVEP IYVSMWEXMSR r LIRGIJSVXL WMQTP] IYVSMWEXMSR � MR

JSYV 'IRXVEP ERH )EWXIVR )YVSTIER 'SYRXVMIW� &YPKEVME� XLI 'ÎGL 6ITYFPMG� ,YRKEV] ERH

4SPERH �'))'��

8LI TETIV MW WXVYGXYVIH EW JSPPS[W� 7IGXMSR � VIGSRWMHIVW XLI GYVVIRX JM\IH�ZIVWYW�JPI\MFPI

I\GLERKI VEXIW HIFEXI ERH WLS[W XLI PMQMXEXMSRW SJ XLI XVEHMXMSREP STXMQYQ GYVVIRG] EVIE

ETTVSEGL� 7IGXMSR � WIXW YT XLI XLISVIXMGEP JVEQI[SVO XS EWWIWW XLI WYMXEFMPMX] SJ XLI EHSTXMSR SJ

E JSVIMKR GYVVIRG] EW PIKEP XIRHIV� HVE[MRK SR XLI PMXIVEXYVI SR HSPPEVMWEXMSR MR 0EXMR %QIVMGE�

6

7IGXMSR � I\EQMRIW XLI GLSMGI SJ XLI STXMQEP I\GLERKI VEXI VIKMQI ERH XLI TVSTSWEP SJ

IYVSMWEXMSR JSV '))'W SR XLI VSEH XS EGGIWWMSR XS XLI )9 ERH )19� 7IGXMSR � EWWIWWIW XLI

WYMXEFMPMX] SJ IYVSMWEXMSR MR XLI '))'�� SR XLI FEWMW SJ XLI GPEWWMGEP STXMQYQ GYVVIRG] EVIE

GVMXIVME� 7IGXMSR � MRZIWXMKEXIW XLI JYPJMPQIRX SJ E WIX SJ MRMXMEP GSRHMXMSRW JSV YRMPEXIVEP

IYVSMWEXMSR MR XLI WEQTPI� 7IGXMSR � TVIWIRXW ER IZEPYEXMSR SJ XLI WTIGMJMG GSWXW ERH FIRIJMXW SJ

IYVSMWEXMSR MR XLI '))'�� *MREPP]� 7IGXMSR � HVE[W XLI GSRGPYWMSRW�

7

2. The fixed-versus-flexible exchange rates debate and the decline of the classical

Optimum Currency Area theory.

8LI TEWX HIGEHI GEQI XS ER IRH [MXL E RI[ [EZI SJ JMRERGMEP ERH GYVVIRG] GVMWIW XLEX LMX

IQIVKMRK ERH XVERWMXMSR GSYRXVMIW� 8LI WIUYIRGI SJ XLIWI GVMWIW LEW FIIR MQTVIWWMZI JSV MXW

KISKVETLMGEP I\XIRWMSR ERH MXW VIKYPEVMX]� XLI 'ÎGL 6ITYFPMG MR �� %WMER XMKIVW MR ��

6YWWME MR �� &VE^MP MR �� 8LMW JMRERGMEP XYVQSMP MRIZMXEFP] VIRI[IH XLI MRXIVIWX MR XLI

GLSMGI SJ XLI STXMQEP I\GLERKI VEXI VIKMQI JSV IQIVKMRK GSYRXVMIW EQSRK IGSRSQMWXW ERH

TSPMG]�QEOIVW� ERH VIZMZIH XLI PSRK�WXERHMRK JM\IH�ZIVWYW�JPI\MFPI I\GLERKI VEXIW GSRXVSZIVW]�

l3R XLI SRI LERH� E JM\IH RSQMREP I\GLERKI VEXI TVSZMHIW WXEFMPMX] XS I\TSVXIVW ERH MQTSVXIVW

ERH GER LIPT XS ERGLSV HSQIWXMG MRJPEXMSR I\TIGXEXMSRW� 8LIWI FIRIJMXW [MPP FI IWTIGMEPP]

EXXVEGXMZI XS GSYRXVMIW [MXL E VIGSVH SJ JMRERGMEP MRWXEFMPMX] ERH HSQIWXMG QSRIXEV] TSPMG]�

QEOMRK XLEX LEW JEMPIH XS OIIT MRJPEXMSR MR GLIGO�

3R XLI SXLIV LERH� QEMRXEMRMRK E TIVQERIRXP] JM\IH I\GLERKI VEXI VIKMQI QIERW EGGITXMRK XLI

PSWW SJ HSQIWXMG QSRIXEV] MRHITIRHIRGI XLEX KSIW [MXL MX� 8LI HSQIWXMG QSRIXEV] EYXLSVMXMIW

EVI GIHMRK XLI GETEGMX] XS YWI QSRIXEV] SV I\GLERKI VEXI TSPMG] XS GYWLMSR XLI IGSRSQ] EKEMRWX

I\XIVREP WLSGOW� 8LMW� MR XYVR GSYPH QIER KVIEXIV ZSPEXMPMX] MR SYXTYX ERH IQTPS]QIRX [LIVI

HSQIWXMG TVMGIW ERH [EKIW GERRSX EHNYWX VETMHP] MR VIWTSRWI XS WYGL WLSGOW�z r 7YQQIVW ��

-R XLIWI X[S WLSVX TEVEKVETLW� XLI JSVQIV 97 (ITYX] 8VIEWYV] 7IGVIXEV] 0E[VIRGI ,� 7YQQIVW

IQFVEGIW WIZIVEP HIGEHIW SJ IGSRSQMG XLISV] ERH SYXPMRIW XLI VIPEXMZI QIVMXW SJ JM\IH ZIVWYW

JPSEXMRK I\GLERKI VEXIW�

8LI JMVWX TEVEKVETL WYKKIWXW XLI FIRIJMXW SJ JM\IH I\GLERKI VEXIW� 8LI IPMQMREXMSR SJ RSQMREP

I\GLERKI VEXI JPYGXYEXMSRW GSYPH JSWXIV MRXIVREXMSREP XVEHI� WMRGI E JM\IH VEXI VIHYGIW I\GLERKI

VMWO ERH XVERWEGXMSRW GSWXW�

� 8LI WEQI TEVEKVETL WXVIWWIW XLI VSPI SJ XLI I\GLERKI VEXI EW

RSQMREP ERGLSV MR WXEFMPMWEXMSR �&VYRS� �� ERH r MQTPMGMXP] � MXW GSVSPPEV] XLEX JM\IH

I\GLERKI VEXIW KVERX QSVI GVIHMFMPMX] XS JMWGEP ERH QSRIXEV] EYXLSVMXMIW XLER JPI\MFPI VEXIW

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1 Empirical studies on the effects of exchange rate volatility on trade did not find a strong negative relationship between the two variables. Recently, Rose (2000) found that a currency union could increase trade by three times. Even though one could be sceptical about the magnitude of this effect, it is undoubted that the adoption of a common currency reduces transaction costs and increases the transparency of any international trade activity. 2 The case for “tying one’s hands” by fixing the exchange rate in order to provide fiscal and monetary discipline has convincingly been challenged on theoretical and empirical ground by Tornell and Velasco (1995), (1998) and (2000).

8

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3 Even though these are the criteria that are discussed the most in the literature, it is possible to find more refined classifications. See, for instance, Tavlas (1993) for a survey.

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4 Frankel and Rose (1998, p.1010) : “We argue that a naïve examination of historical data gives a misleading picture of a country’s suitability for entry into a currency union, since the OCA criteria are endogenous.” 5 See Eichengreen (2000) for a discussion.

10

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6 As noted by Roubini (1998) and Nuti (2000) a “full” convertibility can only be assured by covering a broader domestic monetary aggregate such as M2, i.e. the stock of liquid monetary assets that, in case of crisis, could be easily converted into foreign currency. 7 This is not always the rule. For instance, the currency board of Argentina and Bulgaria can keep foreign- currency-denominated domestic assets.

12

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8See Williamson (1995) for an exhaustive and balanced discussion of the costs and benefits associated with currency boards. See Roubini (1998) for a critical analysis of the benefits of currency boards. See Ghosh et al. (2000) for a positive evaluation of the economic performance of currency boards.

13

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'EPZS �� WLS[W XLEX SJJMGMEP HSPPEVMWEXMSR FIGSQIW TEVXMGYPEVP] EXXVEGXMZI [LIR� EW MR XLI

GEWI SJ 0EXMR %QIVMGER IGSRSQMIW� ER IGSRSQ] TVIWIRXW XLIWI MRMXMEP GSRHMXMSRW� JMRERGMEP

KPSFEPMWEXMSR ERH TEVXMEP YRSJJMGMEP HSPPEVMWEXMSR� *MVWX� I\XIVREP JEGXSVW � WYGL EW XLI 97

QSRIXEV] WXERGI SV GSRXEKMSR IJJIGXW r WYFWXERXMEPP] MRJPYIRGI HSQIWXMG ZEVMEFPIW MRHITIRHIRXP]

SJ XLI EHSTXIH I\GLERKI VIKMQI� 8LIWI JEGXSVW [IEOIR XLI EVKYQIRX JSV MRHITIRHIRX QSRIXEV]

ERH I\GLERKI VEXI TSPMGMIW� 7IGSRHP]� XLI I\MWXIRGI SJ E PEVKI WLEVI SJ HSPPEV�HIRSQMREXIH EWWIXW

9 “Argentina and the Debt Trap”, Financial Times, 22 November, 2000. 10 For example, Russia and Belarus are planning to use the ruble as the common currency starting from 2005 and then move towards a monetary union and an EU-style basket of their two currencies. 11 Note that official dollarisation differs from unofficial dollarisation. The latter occurs when the foreign currency is not legal tender but people voluntarily hold a large share of their financial wealth in foreign assets, either cash or – when it is legal – foreign currency deposits. 12 See JEC (2000).

14

GSQTPMGEXIW XLI GLSMGI SJ ETTVSTVMEXI MRXIVQIHMEXI XEVKIXW SJ QSRIXEV] TSPMG]��

� %X XLI WEQI

XMQI� E PEVKI WLEVI SJ HSPPEV�HIRSQMREXIH PMEFMPMXMIW MR XLI IGSRSQ] �PMEFMPMX] HSPPEVMWEXMSR�

QEOIW E HIZEPYEXMSR HERKIVSYW JSV XLI WXEFMPMX] SJ XLI JMRERGMEP W]WXIQ� [MXLSYX VIHYGMRK XLI

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8LI WMKRMJMGERGI SJ I\XIVREP WLSGOW GSQMRK JVSQ XLI GETMXEP EGGSYRX SJ XLI FEPERGI SJ TE]QIRX�

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VIUYMVIQIRXW EVI WYFWXERXMEPP] XLI WEQI� -R FSXL GEWIW� ER EHIUYEXI PIZIP SJ VIWIVZIW MW RIIHIH XS

GSZIV �GYVVIRG] FSEVH� SV XS FY] YT �HSPPEVMWEXMSR� XLI HSQIWXMG QSRIXEV] FEWI�

8LI HMJJIVIRGI FIX[IIR SJJMGMEP HSPPEVMWEXMSR ERH E GYVVIRG] FSEVH VIPMIW SR XLI EGXYEP GSWXW ERH

XLI I\TIGXIH FIRIJMXW SJ XLI JSVQIV STXMSR� 8LI JSPPS[MRK HMWGYWWMSR HVE[W SR WXYHMIW JSGYWIH

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QSRIXEV] ERH I\GLERKI VEXI TSPMGMIW� HSPPEVMWEXMSR IRXEMPW WSQI WTIGMJMG GSWXW� % GSYRXV]

MRXVSHYGMRK XLI HSPPEV EW PIKEP XIRHIV MRGYVW WSQI QIRY GSWXWQIRY GSWXW XS EHETX ZIRHMRK QEGLMRIW�

EGGSYRXMRK ERH GSQTYXIV TVSKVEQW� IXG� XS XLI RI[ JSVIMKR GYVVIRG]� 1SVI MQTSVXERX�

YRMPEXIVEP HSPPEVMWEXMSR MRZSPZIW XLI GSQTPIXI PSWGSQTPIXI PSWW SJ WIMKRMSVEKIW SJ WIMKRMSVEKI VIZIRYIW �M�I� XLI PSWW SJ MRXIVIWX

SR JSVIMKR EWWIXW� [LMGL EVI YWIH XS FEGO QSRI] WYTTP] MR E GYVVIRG] FSEVH� ERH SJ PIRHIV SJSJ PIRHIV SJ

PEWX VIWSVX JYRGXMPEWX VIWSVX JYRGXMSSRWRW�

% GYVVIRG] FSEVH LSPHW JSVIMKR VIWIVZIW XLEX GER FI MRZIWXIH MR JSVIMKR EWWIXW ERH GER TVSHYGI

JMWGEP VIZIRYI��

��8LMW VIZIRYI MW GSQTPIXIP] PSWX MR XLI GEWI SJ HSPPEVMWEXMSR� YRPIWW E FMPEXIVEP

EKVIIQIRX EPPS[W XS WLEVI XLMW VIZIRYI FIX[IIR XLI MWWYMRK GSYRXV] r [LMGL WEZIW XLI MRXIVIWX

TE]QIRXW SR XLI HIFX XLEX MW XVERWJSVQIH MR GEWL r ERH XLI GSYRXV] XLEX EHSTXW XLI JSVIMKR

GYVVIRG]�

13 See Berg, Andrew and Eduardo Borensztein (2000a). 14 For example, over ninety percent of Argentina’s public debt is denominated in dollars and the latter is around two thirds of the total external debt. It is evident that devaluation cannot substantially relieve Argentina’s indebtedness. 15 These revenues have a fiscal nature to the extent that profits of the currency board are transferred in the government budget.

15

*MREPP]� E HSPPEVMWMRK GSYRXV] KMZIW YT XLI TSWWMFMPMX] SJ TVMRXMRK QSRI] [LIR E JMRERGMEP GVMWMW

SGGYVW� MR SXLIV [SVHW� MX PSWIW XLI PIRHIV SJ PEWX VIWSVX JYRGXMSRW SJ E GIRXVEP FERO� 8LIWI

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WYGL EW XLI GVIEXMSR SJ E FEROMRK WIGXSV WXEFMPMWEXMSR JYRH SV XLI EVVERKIQIRX SJ GSRXMRKIRX

GVIHMX PMRIW [MXL TVMZEXI FEROW� ,S[IZIV� EW RSXIH F] &YMXIV �� T�� XLIWI WSPYXMSRW GSYPH

FI MREHIUYEXI JSV XVYP] W]WXIQMG JMRERGMEP GVMWIW� WMRGI lXLIVI MW RS EHIUYEXI WYFWXMXYXI� MR XLI

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VIZIVWI�

&] IPMQMREXMRK XLI HSQIWXMG GYVVIRG]� E GSYRXV] IPMQMREXIW XLI GYVVIRG] VMIPMQMREXIW XLI GYVVIRG] VMWWO TVIQMYQO TVIQMYQ� 8LI

IPMQMREXMSR SJ GYVVIRG] VMWO FVMRKW SR PS[IVPS[IV MMRXIVIWX VEXIWRXIVIWX VEXIW� [LMGL JSWXIV MRZIWXQIRX ERH

IGSRSQMG KVS[XL� -R EHHMXMSR� PS[IV MRXIVIWX VEXIW VIHYGI XLI WIVZMGI SJ TYFPMG HIFX ERH MQTVSZI

XLI WYWXEMREFMPMX] SJ XLI JMWGEP FEPERGI� 8LISVIXMGEPP]� XLIVI MW EP[E]W XLI TSWWMFMPMX] JSV E

HSPPEVMWIH GSYRXV] XS VI�MRXVSHYGI XLI HSQIWXMG GYVVIRG]� ERH XLI RI[ HSQIWXMG GYVVIRG] GSYPH

FI I\GLERKIH [MXL XLI JSVIMKR GYVVIRG] EX E HMJJIVIRX TEVMX]� XVMKKIVMRK E HIZEPYEXMSR� 7MQMPEVP]�

XLIVI MW EP[E]W XLI TSWWMFMPMX] JSV E WSZIVIMKR WXEXI XS EFERHSR E QSRIXEV] YRMSR� 2IZIVXLIPIWW�

WMRGI XLI TSPMXMGEP ERH IGSRSQMG GSWXW SJ WYGL HIGMWMSRW r PSWW SJ GVIHMFMPMX]� VIZIVWI QIRY GSWXW�

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16 This conclusion strictly holds in the period immediately after the introduction of the foreign or common currency.

16

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XLI IGSRSQ]� I\TSVXW ERH +(4 KVS[XL [SYPH JEPXIV� ERH JSVIMKR GETMXEPW [SYPH [MXLHVE[ JVSQ

XLI GSYRXV] TVSZSOMRK E VIGIWWMSR� 8LI QSRIXEV] ERH JMWGEP EYXLSVMXMIW SJ E HSPPEVMWIH IGSRSQ]

GSYPH RSX VIWSVX XS HIZEPYEXMSR SV QSRIXEV] I\TERWMSR MR SVHIV XS FSSWX XLI IGSRSQ]� 8LI]

GSYPH EP[E]W QEOI YWI SJ I\TERWMSREV] JMWGEP TSPMGMIW� FYX MJ XLI TYFPMG HIFX VER SYX SJ GSRXVSP

XLI QSWX PMOIP] VIWYPX [SYPH FI HIJEYPX�

17 See Eichengreen (2000) for a survey.

17

-R WYQQEV]� HSPPEVMWEXMSR VIUYMVIW E WXVSRKIV TSPMXMGEP GSQQMXQIRX XS VIJSVQ PEFSYV QEVOIX ERH

JMWGEP FEPERGI� E GSQQMXQIRX [MXL QSVI FMRHMRK GSRWXVEMRXW ERH� EX XLI WEQI XMQI� QSVI

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8LIWI GVMXIVME EVI�

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XLI HSQIWXMG GYVVIRG] � E GSYRXV] WYVVIRHIVW E W]QFSP SJ REXMSREP WSZIVIMKRX]�

18

4. Financial integration, corner solutions and the case for adopting the euro as legal

tender in Central and Eastern European countries

8LI �� &VE^MPMER GVMWMW ERH MXW GSRXEKMSYW IJJIGX SR %VKIRXMRE WTEVOIH SJJ XLI HIFEXI SR

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18 Rostowski (“Adopting the euro” Financial Times, 9 August 1999) has originally proposed an early adoption of the euro for the most advanced Central and Eastern European countries; while Gros (1999) has extended this proposal to South-East Europe. 19 See Begg (1998) for an account of the 1997 Czech exchange rate crisis.

19

�� :MEFMPMX] SJ MRXIVQIHMEXI STXMSRW JSV '))'W

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JIEWMFMPMX] SJ XLI JSVQIV XS TEVXMGYPEV GEWIW� *MREPP]� LI LEW TVEMWIH XLI QIVMXW SJ JPSEXMRK VEXIW�

l3R FEPERGI� E JPSEXMRK VEXI W]WXIQ MW QSVI JSVKMZMRK SJ TSPMG] IVVSVW� ERH XLIVIJSVI E WSQI[LEX

WEJIV WSPYXMSR JSV QSWX GSYRXVMIW �|� 7XMPP� XLI EFWIRGI SJ ER I\GLERKI VEXI XEVKIX TVSZMHIW ER

MQTSVXERX� I\XVE HIKVII SJ JVIIHSQ JSV HSQIWXMG TSPMG] QEREKIQIRX ERH HIEPMRK [MXL I\XIVREP

WLSGOW�z � -FMH� �TEVE� ��

l*SV E [MHI VERKI SJ GSYRXVMIW� E JPSEXMRK I\GLERKI VEXI VIKMQI [MPP FI XLI FIWX STXMSR�z r -FMH�

�TEVE� ��

8LI SJJMGMEP TSWMXMSR SJ XLI -1* MW XLEX lRS WMRKPI I\GLERKI VEXI VIKMQI MW ETTVSTVMEXI JSV EPP

QIQFIVW MR EPP GMVGYQWXERGIWz �/¸LPIV� �� TEVE� �� ,S[IZIV� XLI RIKEXMZI I\TIVMIRGI SJ WSJX

TIKW MR %WME� 6YWWME ERH &VE^MP MRHYGIH E TEVXMEP VIXVIEX SJ XLI *YRH JVSQ XLI DQMHHPI KVSYRH SJ

I\GLERKI VEXI EVVERKIQIRXW ERH IRGSYVEKIH E GEYXMSYW TYFPMG IRHSVWIQIRX SJ XLI HIWMVEFMPMX] SJ

GSVRIV WSPYXMSRW�

20

;LMGL TSVXMSR SJ XLI DQMHHPI KVSYRH LEW FIGSQI YRXIREFPI# %GGSVHMRK XS 3FWXJIPH ERH 6SKSJJ

�� T� �� l|XLIVI MW PMXXPI� MJ ER]� GSQJSVXEFPI QMHHPI KVSYRH FIX[IIR JPSEXMRK VEXIW ERH

XLI EHSTXMSR SJ E GSQQSR GYVVIRG]z� 8[S JYRHEQIRXEP VIQEVOW [MPP QEOI XLMW GSRGPYWMSR

QSVI VIEWSREFPI� *MVWX� JPSEXMRK VEXIW WLSYPH RSX RIGIWWEVMP] FI DTYVI� -J E GSYRXV] IQFVEGMRK

JYPP JMRERGMEP MRXIKVEXMSR LEW XS WEGVMJMGI I\GLERKI VEXI WXEFMPMX] SV QSRIXEV] MRHITIRHIRGI� XLIR

l|XLIVI MW RSXLMRK MR I\MWXMRK XLISV]� JSV I\EQTPI� XLEX TVIZIRXW E GSYRXV] JVSQ TYVWYMRK E

QEREKIH JPSEX MR [LMGL LEPJ SJ IZIV] JPYGXYEXMSR MR HIQERH JSV MXW GYVVIRG] MW EGGSQQSHEXI F]

MRXIVZIRXMSR ERH LEPJ MW EPPS[IH XS FI VIJPIGXIH MR XLI I\GLERKI VEXI�z �*VEROIP� �� T� ��

7IGSRHP]� XLI 3FWXJIPH�6SKSJJ GSVRIV WSPYXMSRW XLISV] LSPHW MR XLI PSRK�XIVQ ERH JSV GSYRXVMIW

XLEX LEZI GSQTPIXIP] PMFIVEPMWIH XLIMV GETMXEP EGGSYRX XVERWEGXMSRW� 8LI I\TIVMIRGI SJ XLI

VIJSVQIH )YVSTIER )\GLERKI 6EXI 1IGLERMWQ �)61�--� MR XLI WIGSRH LEPJ SJ XLI RMRIXMIW

WLS[IH XLEX E DGVIHMFPI XEVKIX�^SRI ETTVSEGL r EW E QIHMYQ�XIVQ WXVEXIK] XS[EVHW E QSRIXEV]

YRMSR r GER IJJIGXMZIP] [SVO ERH GER IPMQMREXI WTIGYPEXMZI GETMXEP QSZIQIRXW [MXLSYX

EHQMRMWXVEXMZI GSRXVSPW� 1SVISZIV� E [MHIV VERKI SJ MRXIVQIHMEXI I\GLERKI VEXI EVVERKIQIRXW MW

GSRWMWXIRX [MXL XLI YWI SJ GETMXEP GSRXVSPW� 8LI TSWMXMZI TIVJSVQERGI SJ WSQI IQIVKMRK QEVOIX

IGSRSQMIW� WYGL EW 'LMPI� -WVEIP ERH 4SPERH� LEW HIQSRWXVEXIH XLI ZMEFMPMX] SJ MRXIVQIHMEXI

VIKMQIW� (YVMRK XLI RMRIXMIW� XLIWI GSYRXVMIW LEZI YWIH FEWOIX� FERHW ERH GVE[P� EPSRK [MXL

PSSWIV SV WXVMGXIV GETMXEP GSRXVSPW��

� XS XEVKIX XLI I\GLERKI VEXI ERH QEREKI E KVEHYEP TVSGIWW SJ

HMWMRJPEXMSR� [MXLSYX MRGYVVMRK QENSV GYVVIRG] ERH JMRERGMEP GVMWIW��

�

,IRGI� XLI TVEGXMGEFPI QMHHPI KVSYRH MW RSX WS REVVS[ EW 3FWXJIPH ERH 6SKSJJ WYKKIWX� *MWGLIV

�� T�� TVSZMHIW E QSVI WIRWMFPI ERH PIWW GSQTIPPMRK JSVQYPEXMSR SJ [LEX LI GEPPW XLI

FMTSPEV ZMI[� l|MR IWWIRGI� XLI I\GPYHIH EVVERKIQIRXW EVI JM\IH� EHNYWXEFPI TIK� ERH REVVS[

FERH I\GLERKI VEXI W]WXIQWz� 1ER] DMRXIVMSV WSPYXMSRW EVI WXMPP WYWXEMREFPI� ERH XLI 8YVOMWL

GVMWMW r EW [IPP EW XLI 6YWWMER SRI � TVSZIW SRP] XLEX XLIVI MW RS VSSQ JSV ER] OMRH SJ VMKMHMX] MR

QEREKMRK XLI I\GLERKI VEXI [MXLSYX TSPMXMGEP WYTTSVX ERH IGSRSQMG VIJSVQW�

20 According to the IMF Annual Report on Exchange Arrangements and Exchange Restrictions (1999), Israel had completely liberalised short-term capital transaction, while Chile and Poland had restrictions in all of the categories covered by the report. Both countries, Chile and Poland, recently lifted some capital controls. 21 Target zones and crawling bands have been strongly promoted by Williamson (1996 and 2000) as a viable exchange arrangement for emerging markets.

21

8LI JYPP VERKI SJ STTSVXYRMXMIW XLEX EVI EGGIWWMFPI XS '))'W GER FI I\EQMRIH KVETLMGEPP]� *MKYVI

� r VIEVVERKIH JVSQ *VEROIP �� HIWGVMFIW XLI TVSFPIQ SJ XLI MQTSWWMFPI XVMRMX]� M�I� XLI

MREFMPMX] XS LEZI JYPP JMRERGMEP MRXIKVEXMSR� QSRIXEV] MRHITIRHIRGI ERH I\GLERKI VEXI WXEFMPMX] EX

XLI WEQI XMQI� )ZIV] WMHI SJ XLI XVMERKPI VITVIWIRXW ER SFNIGXMZI SJ TSPMG]�QEOIVW ERH I\IVXW ER

EXXVEGXMSR MR XLI HMVIGXMSR MRHMGEXIH F] XLI EVVS[W� 4SPMG]�QEOIVW GSYPH GLSSWI E GSVRIV SJ XLI

XVMERKPI ERH EGLMIZI X[S KSEPW � XLI X[S WMHIW XLEX GSRJMKYVI XLI WTIGMJMG ERKPI r ERH KMZI YT XLI

XLMVH KSEP r XLI STTSWMXI WMHI� 2SXLMRK TVIZIRXW TSPMG]�QEOIVW JVSQ STXMRK JSV MRXIVQIHMEXI

WSPYXMSRW ERH JVSQ GLSSWMRK E TSWMXMSR MRWMHI XLI XVMERKPI�

-RHIIH� XLI I\GLERKI VEXI EVVERKIQIRXW [LMGL EVI GYVVIRXP] MR TPEGI MR XLI '))'W EVI UYMXI

HMJJIVIRXMEXIH ERH MRGPYHI� QEREKIH JPSEXW MR XLI 'ÎGL 6ITYFPMG� 4SPERH� 6SQERME� 7PSZEO

6ITYFPMG ERH 7PSZIRME� JM\IH TIK MR 0EXZME� GVE[PMRK FERH MR ,YRKEV]� ERH GYVVIRG] FSEVHW MR

&YPKEVME� )WXSRME ERH 0MXLYERME� 8LI '))'W� [LMGL LEZI ETTPMIH JSV )9 QIQFIVWLMT� LEZI RS

SFPMKEXMSR� YTSR EGGIWWMSR� XS TEVXMGMTEXI MR XLI )61�--� FYX EVI I\TIGXIH XS NSMR XLI )19 PEXIV

SR�

7MQMPEVP]� XLI I\XIRX SJ GETMXEP EGGSYRX PMFIVEPMWEXMSR MR 'IRXVEP ERH )EWXIVR )YVSTI HMJJIVW JVSQ

GSYRXV] XS GSYRXV]� [LIVI XLI &EPXMG 7XEXIW ERH XLI 'ÎGL 6ITYFPMG EVI EX ER EHZERGIH WXEKI SJ

PMFIVEPMWEXMSR� 8LI '))'W EVI I\TIGXIH XS PMFIVEPMWI XLI GETMXEP EGGSYRX FIJSVI IRXIVMRK )9� FYX

XLI] GER OIIT GETMXEP GSRXVSPW YTSR )9 EGGIWWMSR� )9 ERH XLI 1EEWXVMGLX 8VIEX] EPPS[ JSV

XVERWMXSV] TIVMSHW FIJSVI VIQSZMRK GETMXEP GSRXVSPW ERH XIQTSVEV] VIWXVMGXMSRW SR GETMXEP

QSZIQIRXW MR GEWI SJ FEPERGI SJ TE]QIRXW GVMWIW��

��

�

8LI WMXYEXMSR SJ '))'�� [MXL VIKEVH XS QSRIXEV] TSPMG] JVEQI[SVO� I\GLERKI VEXI VIKMQI ERH

I\XIRX SJ GETMXEP EGGSYRX PMFIVEPMWEXMSR MW WYQQEVMWIH MR XEFPI �� 8LI 'ÎGL 6ITYFPMG MW XLI

JVSRX�VYRRIV MR GETMXEP EGGSYRX PMFIVEPMWEXMSR� JSPPS[IH F] ,YRKEV] ERH 4SPERH� [LMGL WXMPP LEZI

XS PMFIVEPMWI WLSVX�XIVQ GETMXEP JPS[W� (YVMRK �� &YPKEVME LEW WYFWXERXMEPP] IRLERGIH XLI

PMFIVEPMWEXMSR SJ MXW GETMXEP QEVOIX F] MRXVSHYGMRK E RI[ *SVIMKR )\GLERKI 0E[ ERH E 0E[ SR

4YFPMG 3JJIVMRK SJ 7IGYVMXMIW�

22 See Temprano-Arroyo and Feldman (1999) for a discussion on pace and sequencing of capital account liberalisation in candidate countries.

22

8EFPI � TVSZMHIW XLI IWWIRXMEP MRJSVQEXMSR XS PSGEXI XLI '))'�� MRWMHI XLI XVMERKPI HITMGXIH MR

JMKYVI �� 8LIVI MW SRI GEZIEX� 1EREKIH JPSEX MW GSRWMHIVIH F] XLI -1* XLI QSWX JPI\MFPI I\GLERKI

VEXI EVVERKIQIRX WLSVX SJ ER MRHITIRHIRX JPSEXMRK [LIVI XLI I\GLERKI VEXI MW QEVOIX

HIXIVQMRIH� -X MW [SVXL VIQMRHMRK XLEX E WYFWXERXMEP QERMTYPEXMSR SJ QEREKIH JPSEX GSYPH HI

JEGXS XVERWJSVQ E JPI\MFPI I\GLERKI EVVERKIQIRX MRXS E ZIV] VMKMH SRI� 8LI JMREP HIWXMREXMSR SJ

'))'W SR XLI VSEH XS EGGIWWMSR XS XLI )9 MW XLI VMKLX�FSXXSQ GSVRIV SJ XLI XVMERKPI VITVIWIRXIH

MR JMKYVI � � E QSRIXEV] YRMSR [MXL JYPP GETMXEP EGGSYRX PMFIVEPMWEXMSR� -J XLI HIWXMREXMSR MW SRP]

SRI� XLIVI MW RSX E YRMUYI [E] XS KIX XLIVI�

23

Table 1. Exchange rate regime, monetary policy and capital controls in the CEEC-4 &YPK&YPKEEVMEVME 'ÎG'ÎGLL 6ITY6ITYFFPMGPMG ,YRK,YRKEEV]V] 4SPERH4SPERH

)\GLERK)\GLERKII VVEXEXI VI VIKIKMMQQII�

'YVVIRG] FSEVH1EREKIH JPSEX [MXL RS TVI�ERRSYRGIH TEXL JSV I\GLERKI

VEXI

)\GLERKI VEXI [MXLMR GVE[PMRKFERHW

1EREKIH JPSEX [MXL RS TVI�ERRSYRGIH TEXL JSV I\GLERKI

VEXI

1SRI1SRIXXEVEV]] TTSSPMPMGG] JV] JVEEQQII[[SSVOVO� )\GLERKI VEXI ERGLSV �)YVS� -RJPEXMSR XEVKIXMRK )\GLERKI VEXI ERGLSV �)YVS� -RJPEXMSR XEVKIXMRK

'ETMX'ETMXEPEP EGEGGGSYRSYRX PX PMFMFIIVEVEPPMMWWEEXXMSR MRHMSR MRHII\\�

%W SJ �� (IGIQFIV �� %W SJ �� (IGIQFIV �� %W SJ �� (IGIQFIV �� %W SJ �� (IGIQFIV ��

� 'SRXVSPW SR GVIHMX STIVEXMSRW �� 'SRXVSPW SR TSVXJSPMS JPS[W �� 3ZIVEPP MRHI\ SJ PMFIVEPMWEXMSR ��

'SRXV'SRXVSSPPWW SRSR� %W SJ �� %TVMP �� %W SJ �� .ERYEV] �� %W SJ �� .ERYEV] �� %W SJ �� .ERYEV] ��

� 'ETMXEP QEVOIX WIGYVMXMIW =)7 =)7 =)7 =)7

� 1SRI] QEVOIX MRWXVYQIRXW =)7 =)7 =)7 =)7� 'SPPIGXMZI MRZIWXQIRX WIGYVMXMIW =)7 =)7 =)7 =)7� (IVMZEXMZIW ERH SXLIV MRWXVYQIRXW =)7 23 =)7 =)7� 'SQQIVGMEP GVIHMXW =)7 23 23 =)7� *MRERGMEP GVIHMXW =)7 23 =)7 =)7� +YEVERXIIW ERH JMRERGMEP FEGOYTJEGMPMXMIW

=)7 23 =)7 =)7

� (MVIGX MRZIWXQIRXW =)7 =)7 =)7 =)7� 0MUYMHEXMSR SJ HMVIGX MRZIWXQIRXW 23 23 23 23� 6IEP IWXEXI XVERWEGXMSRW =)7 =)7 =)7 =)7� 4IVWSREP GETMXEP QSZIQIRXW =)7 23 =)7 =)7

'SRXV'SRXVSSPPWW SR GVISR GVIHHMMXX SSTTIVIVEEXMSXMSRRW ERHW ERHTSVTSVXXJSJSPPMS JMS JPPSS[[WW��1EN1ENSSV GLV GLERERKKIW WIW WMMRGRGII ��

�

�� 2I[ *SVIMKR )\GLERKI 0E[IRXIVIH MRXS JSVGI� %PP XVERWEGXMSRWMRZSPZMRK VIWMHIRXW ERH RSR�VIWMHIRXW QE] FI GSRHYGXIH JVIIP]YRPIWW SXLIV[MWI WXMTYPEXIH MR XLI

0E[� 4VMSV VIKMWXVEXMSR [MXL XLI&2& VIQEMRW JSV E PMQMXIH RYQFIVSJ XVERWEGXMSRW� -QTSVX SJ REXMSREPERH JSVIMKR I\GLERKI GEWL F]VIWMHIRXW ERH RSR�VIWMHIRXWPMFIVEPMWIH�0E[ SR 4YFPMG 3JJIVMRK SJ7IGYVMXMIW� KVERXMRK IUYEP XVIEXQIRXSJ VIWMHIRX ERH RSR�VIWMHIRXW�IRXIVIH MRXS JSVGI� %HQMWWMSR SJJSVIMKR WIGYVMXMIW XS XLI &YPKEVMERGETMXEP QEVOIX�

�� 8LI 7IGYVMXMIW 'SQQMWWMSR%GX IRXIVIH MRXS JSVGI� VIQSZMRKQSWX VIWXVMGXMSRW SR GSRXVSPWMQTSWIH F] XLI TVIZMSYW 7IGYVMXMIW0E[�

�� 'SRXVSPW SR JSVIMKR WIGYVMXMIWSTIVEXMSRW ERH MR HIVMZEXMZIW [IVIIPMQMREXIH�

�� 4VMSV EYXLSVMWEXMSR JSVMWWYMRK HIFX WIGYVMXMIW EFVSEH [EWIPMQMREXIH�

�� -WWYI SJ WLEVIW ERH FSRHW[MXL QEXYVMX] SJ QSVI XLER SRI]IEV� HIRSQMREXIH MR JSVIMKRI\GLERKI ERH MWWYIH F] 3)'(�FEWIH IRXIVTVMWIW� [EW PMFIVEPMWIH�

�� 'VIHMXW ERH PSERW MR JSVIMKRGYVVIRG] [MXL E QEXYVMX] SJ QSVIXLER SRI ]IEV KVERXIH F] VIWMHIRXWXS RSR�VIWMHIRXW� [IVI PMFIVEPMWIH�

�� 2I[ JSVIMKR I\GLERKI PE[IRXIVIH MRXS JSVGI� 8LI PE[HMJJIVIRXMEXIW FIX[IIR FER ERH RSR�FERO IRXMXMIW� &EROW GER GSRHYGXWSQI WLSVX�XIVQ GETMXEP

XVERWEGXMSRW JVIIP]�'SRXVSPW SR JMRERGMEP HIVMZEXMZIWPMWXIH SR XLI ;EVWE[ 7XSGO)\GLERKI� [IVI PMJXIH�

��

%W SJ .YP] �� -1* ;SVPH )GSRSQMG 3YXPSSO ��

8IQTVERS�%VVS]S ERH *IPHQER �� 8LI MRHI\ VERKIW JVSQ � XS �� [LIVI �� ! JYPP PMFIVEPMWEXMSR��

-1* %RRYEP 6ITSVX SR )\GLERKI %VVERKIQIRX ERH )\GLERKI 6IWXVMGXMSRW ��

-1* %RRYEP 6ITSVX SR )\GLERKI %VVERKIQIRX ERH )\GLERKI 6IWXVMGXMSRW �� ERH )YVSTIER 'SQQMWWMSR �� 6IKYPEV 6ITSVXW SR TVSKVIWW XS[EVHW EGGIWWMSR�

24

Figure 1. The Central and Eastern European Countries and the Impossible Trinity 44YVI JPSEXYVI JPSEX

1EREKIH JPSEX

'>'>

'VE[PMRK FERH

4433 'VE[PMRK TIK

,2,2 4IK [MXLMR LSVM^SRXEP FERH �[MHIV XLER ¥

�TIVGIRX�

*M\IH TIK �REVVS[ QEVKMR SJ EX QSWX ¥ �

TIVGIRX�

'YVVIRG] FSEVH

&&00 (SPPEVMWEXMSR�)YVSMWEXMSR

*YPP GETMXEP GSRXVSPW 1SRIXEV] YRMSR

*MKYVI VIEVVERKIH ERH I\XIRHIH JVSQ *VEROIP �� )\GLERKI VEXI GPEWWMJMGEXMSR EGGSVHMRK XS -1* %RRYEP 6ITSVX ��

Monetary independence

Full financial integration

Exchange rate

stability

25

�� )YVSMWEXMSR ERH EGGIWWMSR XS XLI )9 ERH )19

8LI PYVI SJ ER IEVP] EHSTXMSR SJ XLI IYVS ERMQEXIH TVS�)YVSTIER TSPMG] GMVGPIW MR GSYRXVMIW

WYGL EW &YPKEVME� )WXSRME ERH 4SPERH� 3R TSPMXMGEP KVSYRH� IYVSMWEXMSR [SYPH VIMRJSVGI XLI

GSQQMXQIRX SJ GERHMHEXI GSYRXVMIW XS NSMR XLI )9 ERH )19 EW WSSR EW TSWWMFPI�

2IZIVXLIPIWW� XLI I\GLERKI VEXI TSPMG] SJ '))'W MW TEVX SJ E GSQTPI\ RIKSXMEXMSR XS EGGIWW

XS XLI )YVSTIER 9RMSR ERH )GSRSQMG 1SRIXEV] 9RMSR� 8LI HIGMWMSR EFSYX XLI I\GLERKI

VEXI VIKMQI MW SRI SJ XLI QER] GEVHW XLEX GERHMHEXI GSYRXVMIW [MPP LEZI XS TYX SR XLI XEFPI

HYVMRK XLI FEVKEMRMRK�

%W RSXIH F] 2YXM �� RIMXLIV IRPEVKIQIRX RSV YRMPEXIVEP IYVSMWEXMSR [IVI FIMRK

GSRXIQTPEXIH [LIR XLI 1EEWXVMGLX 8VIEX] [EW FIMRK WXMTYPEXIH� *EGMRK E PIKMWPEXMZI ZEGYYQ�

)9 EYXLSVMXMIW �)'3*-2� �� TYX JSV[EVH E VMKMH MRXIVTVIXEXMSR SJ XLI 8VIEX] ERH

IRZMWEKIH XLVII HMWXMRGX WXEKIW JSV XLI JYPP QSRIXEV] MRXIKVEXMSR SJ GERHMHEXI GSYRXVMIW�

�� % TVI�EGGIWWMSR TLEWI� GSZIVMRK XLI TIVMSH YT XS )9 EGGIWWMSR� HYVMRK [LMGL XLIVI EVI

RS VIWXVMGXMSRW SR XLI GLSMGI SJ ER I\GLERKI VIKMQI�

�� %R EGGIWWMSR TLEWI� GSZIVMRK XLI TIVMSH JVSQ )9 EGGIWWMSR YT XS XLI I\TIGXIH IRXV] MRXS

XLI )61�--� (YVMRK XLMW TIVMSH XLI I\GLERKI VEXI TSPMG] LEW XS FI GSRWMHIVIH EW E

QEXXIV SJ GSQQSR MRXIVIWX �EVX� �� SJ XLI 1EEWXVMGLX 8VIEX]� ERH GSQTIXMXMZI

HIZEPYEXMSRW EVI RSX EPPS[IH�

�� 8LI JMREP TLEWI� GSZIVMRK XLI TIVMSH YT XS XLI EHSTXMSR SJ XLI IYVS� (YVMRK XLMW TLEWI

XLI I\GLERKI VEXI SJ RI[ 1IQFIV 7XEXIW [MPP JSPPS[ XLI VYPIW SJ XLI )61�--� [LMGL

TVSZMHI JSV E WXEFPI FYX EHNYWXEFPI GIRXVEP VEXI XS XLI IYVS [MXLMR LSVM^SRXEP FERHW SJ ��

�� TIVGIRX� *VII JPSEXW� QEREKIH JPSEXW [MXLSYX E QYXYEPP] EKVIIH GIRXVEP TEVMX]�

GVE[PMRK TIKW� ERH TIKW EKEMRWX GYVVIRGMIW SXLIV XLER IYVS EVI RSX GSQTEXMFPI [MXL XLI

)61�--� [LMPI XLI GSQTEXMFMPMX] SJ GYVVIRG] FSEVHW [MXL XLI )61�-- MW RSX I\GPYHIH�

%JXIV LEZMRK WEXMWJMIH XLI 1EEWXVMGLX GVMXIVME r [LMGL IRXEMP EX PIEWX X[S ]IEVW SJ

I\GLERKI VEXI WXEFMPMX] � XLI RI[ 1IQFIV 7XEXIW GSYPH EHSTX XLI IYVS�

26

;MXLMR XLMW MRWXMXYXMSREP JVEQI[SVO� XLI TVSWTIGX SJ E YRMPEXIVEP IYVSMWEXMSR FIJSVI )9

EGGIWWMSR LEW VIGIMZIH E RIKEXMZI VIGITXMSR�

l|MX WLSYPH FI QEHI GPIEV XLEX ER] YRMPEXIVEP EHSTXMSR SJ XLI WMRKPI GYVVIRG] F] QIERW SJ

DIYVSMWEXMSR [SYPH VYR GSYRXIV XS XLI YRHIVP]MRK IGSRSQMG VIEWSRMRK SJ )19 MR XLI 8VIEX]�

[LMGL JSVIWIIW XLI IZIRXYEP EHSTXMSR SJ XLI IYVS EW XLI IRHTSMRX SJ E WXVYGXYVIH GSRZIVKIRGI

TVSGIWW [MXLMR E QYPXMPEXIVEP JVEQI[SVO� 8LIVIJSVI� YRMPEXIVEP DIYVSMWEXMSR [SYPH RSX FI E

[E] XS GMVGYQZIRX XLI WXEKIW JSVIWIIR F] XLI XVIEX] JSV XLI EHSTXMSR SJ XLI IYVS�z r )'3*-2

�� TEVE� ��

;LEX MW XLI VIEWSR JSV XLMW JMVQ ERH VIWSPYXI VINIGXMSR SJ IYVSMWEXMSR F] )9 TSPMG]�QEOIVW# -

[MPP WYKKIWX X[S TSWWMFPI I\TPEREXMSRW� *MVWX� XLI HSGYQIRX SJ XLI )'3*-2 'SYRGMP VIEJJMVQW

XLI +IVQER TSWMXMSR SR XLI EHSTXMSR SJ XLI WMRKPI GYVVIRG]� 8LMW TSWMXMSR MW ORS[R MR XLI

PMXIVEXYVI SR )YVSTIER QSRIXEV] YRMJMGEXMSR EW XLI DGSVSREXMSR XLISV]� [LIVI XLI EHSTXMSR

SJ XLI IYVS MW GSRWMHIVIH EW XLI JMREP VI[EVH EJXIV E PIRKXL] TVSGIWW SJ WXVYGXYVEP ERH

RSQMREP GSRZIVKIRGI� &ILMRH XLI VLIXSVMG SJ XLI IGSRSQMG GSRZIVKIRGI XLIVI EVI XLI

GSRGIVRW SJ +IVQER EYXLSVMXMIW EFSYX XLI GVIHMFMPMX] SJ XLI IYVS� 7IGSRH� IYVSMWEXMSR GSYPH

FI TSPMXMGEPP] YRGSQJSVXEFPI JSV XLI )YVSTIER 9RMSR� % GSYRXV] XLEX YRMPEXIVEPP] EHSTXW XLI

IYVS MW RSX SFPMKIH XS EKVII [MXL )9 GSYRXIVTEVXW SR E WTIGMJMG I\GLERKI VEXI� )ZIR MJ XLI

I\GLERKI VEXI [IVI GLSWIR MR E QYXYEP EKVIIQIRX� XLI GERHMHEXI GSYRXV] [SYPH LEZI KVIEXIV

FEVKEMRMRK TS[IV SR XLMW TEVXMGYPEV QEXXIV�

*VSQ ER IGSRSQMG TSMRX SJ ZMI[� XLI XLVII�TLEWI )9 WXVEXIK] TVSZMHIW XLI EHZERXEKI SJ E

QSVI KVEHYEP ERH JPI\MFPI ETTVSEGL XS JYPP )19 QIQFIVWLMT� (YVMRK XLI RMRIXMIW� GETMXEP

MRJPS[W ERH JEWXIV TVSHYGXMZMX] KVS[XL MR XVEHIH KSSHW WIGXSV VIPEXMZI XS RSR�XVEHIH WIGXSVW

FVSYKLX EFSYX VIEP I\GLERKI VEXI ETTVIGMEXMSR MR XVERWMXMSR GSYRXVMIW� 8LMW XVIRH WLSYPH

GSRXMRYI EW PSRK EW '))'W GSQTPIXI XLI TVSGIWW SJ VIEP GSRZIVKIRGI [MXL XLI )9� 8LI )9

WXVEXIK] EPPS[W JSV RSQMREP VIZEPYEXMSR SJ XLI I\GLERKI VEXI� [LMGL [SYPH QEOI MX IEWMIV XS

FVMRK HS[R MRJPEXMSR MR '))'W EX )9 PIZIP� 3R XLI GSRXVEV]� GSYRXVMIW [MXL ER] JM\IH

VIKMQI� [MXL ER IYVS�FEWIH GYVVIRG] FSEVH� SV IYVSMWIH GSYRXVMIW� GSYPH SFXEMR VIEP

VIZEPYEXMSR SRP] XLVSYKL LMKLIV MRJPEXMSR VEXIW [MXL VIWTIGX XS XLI IYVS EVIE� ,MKLIV

MRJPEXMSR VEXIW [MPP HIPE] E TVSWTIGXMZI IRXV] MR XLI )19� [LMGL VIUYMVIW XLI GSRZIVKIRGI SJ

27

MRJPEXMSR VEXIW MR XLI ]IEV MR XLI VYR YT XS JYPP )19 QIQFIVWLMT� *SV XLMW VIEWSR 1EWWSR

�� T�� WYKKIWXW XLEX l|MR TVEGXMGI� E L]FVMH W]WXIQ [MXL WSQI [IMKLX KMZIR XS FSXL

MRJPEXMSR ERH XLI I\GLERKI VEXI QE] IQIVKIz� 3RGI XLEX E RI[ 1IQFIV 7XEXI IRXIVW XLI

XLMVH TLEWI SJ XLI )9 WXVEXIK]� XLI WGSTI JSV JPI\MFMPMX] WLSYPH FI PMQMXIH XS XLI �� TIVGIRX

JPYGXYEXMSRW FERHW EVSYRH XLI GLSWIR GIRXVEP VEXIW� )ZIR XLIWI PEVKI FERHW GSYPH FI TVSRI XS

WTIGYPEXMZI EXXEGOW� [LMGL [MPP JSVGI VI�EPMKRQIRXW ERH [MPP TYX SJJ XLI EHSTXMSR SJ XLI

IYVS��

� 2IZIVXLIPIWW� XLI )61�-- TVSZMHIW KVIEXIV GVIHMFMPMX] XS XLI TIK� WMRGI XLI RI[

1IQFIV 7XEXIW GYVVIRG] GSYPH FIRIJMX JVSQ XLI JSVIMKR I\GLERKI MRXIVZIRXMSRW SJ XLI

)YVSTIER 'IRXVEP &ERO �)'&��

3R XLI SXLIV LERH� IYVSMWEXMSR� F] VEHMGEPP] VIQSZMRK ER] TSWWMFMPMX] SJ GYVVIRG]

WTIGYPEXMSR� [MPP IPMQMREXI SRI SJ XLI WSYVGIW SJ ZSPEXMPMX] MR GETMXEP JPS[W� -J XLI GERHMHEXI

GSYRXVMIW EGGIWWMSR XS XLI )9 [IVI XS FI HIPE]IH� XLI TSWWMFMPMX] SJ E GYVVIRG] GVMWMW [SYPH

MRGVIEWI� 8LI XLVIEX ERH XLI TSWWMFPI RIKEXMZI GSRWIUYIRGIW [SYPH FI KVIEXIV JSV GSYRXVMIW

[LMGL LEZI EHSTXIH VMKMH I\GLERKI VIKMQIW WYGL EW E GYVVIRG] FSEVH� -R XLMW GEWI�

IYVSMWEXMSR [SYPH VITVIWIRX XLI SRP] ZMEFPI WSPYXMSR XS WEZI XLI VIWYPXW SJ QEGVSIGSRSQMG

VIJSVQW� [LMGL LEZI EVHYSYWP] FIIR EGLMIZIH�

5. Classical optimum currency area criteria and the CEEC-4

8LMW WIGXMSR TVIWIRXW ER EREP]WMW SJ WIPIGXIH STXMQYQ GYVVIRG] EVIE GVMXIVME MR XLI '))'��

%GGSVHMRK XS XLISV]� WQEPP STIR IGSRSQMIW EVI QSVI PMOIP] XS FIRIJMX JVSQ E JM\IH I\GLERKI

VEXI� WMRGI RSQMREP GSWXW ERH HSQIWXMG TVMGIW EVI PMROIH XS XLI I\GLERKI VEXI ERH MX MW QSVI

HMJJMGYPX XS XVMKKIV VIEP I\GLERKI VEXI HITVIGMEXMSR ZME RSQMREP HIZEPYEXMSR�

8EFPI � VITSVXW XLI WMÎ MRHMGEXSVW� 4SPERH MW XLI SRP] QIHMYQ WMÎ IGSRSQ] [MXL E

TSTYPEXMSR SJ EPQSWX JSVX] QMPPMSR TIVWSRW �� TIVGIRX SJ )9 TSTYPEXMSR� ERH E XSXEP +(4 EX

GYVVIRX TVMGIW [LMGL MW EPQSWX � TIVGIRX SJ )9 +(4� -R XLI SXLIV JSYV GSYRXVMIW� XLI WLEVI SJ

+(4 VIPEXMZI XS XLI )9 MW ZIV] WQEPP ERH VERKIW JVSQ �� TIVGIRX MR &YPKEVME XS ��

TIVGIRX MR XLI 'ÎGL 6ITYFPMG� 8LI VIPEXMZI WMÎ SJ XLI '))'�� IGSRSQMIW MW PEVKIV [LIR

23 In 1995 Spain and Portugal devalued their currencies despite having adopted 30 percent wide bands.

28

+(4 MW QIEWYVIH SR 4YVGLEWMRK 4S[IV 4EVMX] �444� FEWMW� -R ER] GEWI� XLI WMÎ SJ '))'��

IGSRSQMIW HSIW RSX EPPS[ XLIQ XS MRJPYIRGI TVMGIW MR XLI [SVPH QEVOIX�

8EFP8EFPI �I �� '� ')))')'�� WWM^MÎ MI MRHMRHMGGEEXXSVSVW� �W� ��

&YPKEVME 'ÎGL

6IT�

,YRKEV] 4SPERH )9

4IV GETMXE +(4 SR 444 FEWMW �EW

� SJ )9�

��

+(4 EX GYVVIRX TVMGIW ERH

I\GLERKI VEXIW

�EW

� SJ )9�

��

+(4 SR 444 FEWMW �EW

� SJ )9�

��

4STYPEXMSR �MR

QMPPMSRW�

��

� �EW

� SJ )9�

��

7SYVGI� )YVSWXEX � 7XEXMWXMGW MR *SGYW� ZEVMSYW MWWYIW�

8EFPI � WLS[W XLI STIRRIWW MRHMGEXSVW� 8LI 'ÎGL 6ITYFPMG ERH ,YRKEV] EVI X[S

WMKRMJMGERXP] STIR IGSRSQMIW� XLIMV JSVIMKR XVEHI WLEVI XS +(4 �QIEWYVIH EX QEVOIX

I\GLERKI VEXI� MW PEVKIV XLER SRI �� TIVGIRX ERH �� TIVGIRX VIWTIGXMZIP]� ERH KVIEXIV XLER

XLI )9 EZIVEKI� 8LI &YPKEVMER IGSRSQ] MW EPWS KVIEXP] STIR XS JSVIMKR XVEHI� [LMPI 4SPERH MW

QSVI GPSWIH VIPEXMZIP] XS )9 ERH SXLIV GERHMHEXI GSYRXVMIW� 8LI WLEVI SJ JSVIMKR XVEHI SR

+(4 HMQMRMWLIW MR EPP '))'�� SRGI MX MW QIEWYVIH SR 444 FEWMW ERH XLI HIKVII SJ STIRRIWW

SJ '))'�� FIGSQIW WQEPPIV XLER XLI )9 EZIVEKI� %W VIKEVHW XLI HMVIGXMSR SJ XVEHI� XLI

29

)YVSTIER 9RMSR MW XLI QENSV XVEHMRK TEVXRIV SJ '))'�� 8LI WLEVI SJ I\TSVXW XS )9 MW MR EPP

JSYV GSYRXVMIW PEVKIV XLER �� TIVGIRX� [MXL ,YRKEV] I\TSVXMRK XLVII�UYEVXIVW SJ XSXEP

I\TSVXW XS[EVHW XLI )9� 8LI WLEVI SJ MQTSVXW JVSQ )9 SR XSXEP MQTSVXW MW WMKRMJMGERX MR EPP

JSYV GSYRXVMIW� -R �� XLI )YVSTIER 9RMSR EGGSYRXIH JSV EVSYRH �� TIVGIRX SJ XSXEP

MQTSVXW MR EPP GSYRXVMIW ETEVX JVSQ &YPKEVME XLEX LEH E WQEPPIV WLEVI SJ MQTSVXW JVSQ )9 ��

TIVGIRX SJ XSXEP MQTSVXW��

8EFP8EFPI �I �� '� ')))')'�� SSTTIIRRRRIIWWWW MMRRHMHMGGEEXXSSVVWW��

&YPKEVME 'ÎGL

6IT�

,YRKEV] 4SPERH )9�

)\TSVX � -QTSVXW EX QEVOIX

I\GLERKI VEXIW

�EW

� SJ +(4�

��

)\TSVX � -QTSVXW SR 444 FEWMW �EW

� SJ +(4�

��

-QTSVXW JVSQ )9 �EW

� SJ XSXEP�

��

��

�

)\TSVXW XS )9

�EW � SJ XSXEP�

��

��

�

7SYVGIW� -1* ;SVPH )GSRSQMG 3YXPSSO �� )YVSWXEX 7XEXMWXMGW MR *SGYW r ZEVMSYW MWWYIW

�

)9�� YR[IMKLXIH EZIVEKI��

TVIPMQMREV] -1*��

+97 r 'IRXVEP 7XEXMWXMGEP 3JJMGI SJ

4SPERH

30

*VSQ EPP EGGSYRXW� XLI 'ÎGL 6ITYFPMG� ,YRKEV] ERH &YPKEVME TEWW XLI JMVWX XIWX SJ XLI

STXMQYQ GYVVIRG] EVIE XLISV]� 8LI] EVI WQEPP STIR IGSRSQMIW XVEHMRK QEMRP] [MXL XLI

)YVSTIER 9RMSR ERH [SYPH FIRIJMX JVSQ E PMRO XS XLI IYVS� 4SPERH XVEHIW QEMRP] [MXL XLI

)9 ERH E PMRO [MXL XLI IYVS MW HIJMRMXIP] VEXMSREP� FYX MX LEW E PEVKIV IGSRSQMG WMÎ ERH E

VIPEXMZIP] GPSWIV IGSRSQ]� 8LMW QIERW XLEX� MR 4SPERH� MRHITIRHIRX QSRIXEV] ERH I\GLERKI

VEXI TSPMGMIW GSYPH LEZI XVERWMXSV] IJJIGXW SR XLI VIPEXMZI TVMGI SJ XVEHIH ERH RSR�XVEHIH

KSSHW�

8LI HIKVII SJ TVMGI ERH [EKI JPI\MFMPMX] MW SRI SJ XLI JYRHEQIRXEP GVMXIVME SJ XLI STXMQYQ

GYVVIRG] EVIE XLISV]� 8LI PEGO SJ GYVVIRG] JPI\MFMPMX] QIERW XLEX XLI FYVHIR SJ EHNYWXQIRX XS

I\SKIRSYW WLSGOW JEPPW SR VIEP [EKIW� -J VIEP [EKIW EVI VMKMH XLMW FYVHIR JEPPW SR

IQTPS]QIRX� 9RJSVXYREXIP]� XLIVI MW WGEVGI IQTMVMGEP IZMHIRGI SR XLI TIVWMWXIRGI SJ RSQMREP

VMKMHMXMIW MR '))'W� -R SVHIV XS GMVGYQZIRX XLMW TVSFPIQ� XEFPI � HMWTPE]W XLI WYVZI] VIWYPXW

SR PEFSYV QEVOIX JPI\MFMPMX] SJ XLI �� +PSFEP 'SQTIXMXMZIRIWW 6ITSVX� 8LI VIWYPXW GSRJMVQ

XLI [MHIWTVIEH STMRMSR SJ JPI\MFPI PEFSYV QEVOIXW MR XLI 'ÎGL 6ITYFPMG ERH ,YRKEV] ERH

SJ E VMKMH PEFSYV QEVOIX MR 4SPERH� 8LI 'ÎGL 6ITYFPMG ERH ,YRKEV] EGLMIZIH ER EZIVEKI

WGSVI SJ PEFSYV JPI\MFMPMX] XLEX MW WPMKLXP] MRJIVMSV XS XLI XST WGSVI SJ XLI 9RMXIH 7XEXIW� 4SPERH

VEROIH FIPS[ &YPKEVME ERH SFXEMRIH E WGSVI WMQMPEV XS +IVQER]� [LMGL MW KIRIVEPP] VIKEVHIH

EW E VMKMH PEFSYV QEVOIX� ,MKL VEXIW SJ HE]W PSWX JSV PEFSYV HMWTYXIW ERH E LMKL

YRIQTPS]QIRX VEXI GSVVSFSVEXI XLI L]TSXLIWMW SJ E VMKMH PEFSYV QEVOIX MR 4SPERH�

31

Table 4. Labour market flexibility in selected CEECs, Germany and US

&YPKEVME 'ÎGL6IT�

,YRKEV]

4SPERH +IVQER]

97

7YVZI] VIWYPXW

� 1MRMQYQ [EKI VIKYPEXMSRW ��

� ,MVMRK ERH JMVMRK TVEGXMGIW ��

� 0EFSYV VIKYPEXMSRW ��

� 9RIQTPS]QIRX MRWYVERGI ��

� 7SGMEP [IPJEVI W]WXIQ ��

� 7XVMOIW ��

%ZIVEKI WGSVI ��

0EFSYV XE\ [IHKI

�'SWX XS JMVQ EW E � SJ [SVOIVW

XEOI LSQI TE]�

��

6EXIW SJ HE]W RSX [SVOIH �TIV�� [SVOIVW�

��

�

R�E ��

��

�

R�E R�E ��

9RIQTPS]QIRX VEXI �� SJ PEFSYVJSVGI� I�T��

�

��

7GSVIW MR XLI UYIWXMSRREMVI VERKI JVSQ � XS �� % LMKLIV WGSVI MRHMGEXIW KVIEXIV PEFSYV

QEVOIX JPI\MFMPMX] SV WQEPPIV GSWXW JSV JMVQW� 7SYVGI� +PSFEP 'SQTIXMXMZIRIWW 6ITSVX ��

;SVPH )GSRSQMG *SVYQ� +IRIZE� 7[MXÎVPERH�

�

-03 =IEVFSSO SJ 0EFSYV 7XEXMWXMGW �� -RXIVREXMSREP PEFSYV 3JJMGI� +IRIZE��

9RMXIH 2EXMSRW r )GSRSQMG 'SQQMWWMSR JSV )YVSTI�

*MREPP]� E GSYRXV] XLEX TIKW XLI I\GLERKI VEXI� SV NSMRW E QSRIXEV] YRMSR� PSWIW XLI EFMPMX] XS

YWI XLI QSRIXEV] TSPMG] XS WQSSXL XLI IGSRSQMG G]GPI� -J XLI HIKVII SJ W]RGLVSRMWEXMSR SJ

FYWMRIWW G]GPIW EQSRK XLI GSYRXVMIW XLEX JSVQ XLI GYVVIRG] EVIE MW LMKL� XLI GSWX SJ PSWMRK

QSRIXEV] MRHITIRHIRGI [MPP FI WQEPPIV�

32

7IZIVEP IGSRSQMWXW [SRHIVIH [LIXLIV XLI FYWMRIWW G]GPIW MR XLI )9 ERH XLI '))'W [IVI

GSRZIVKMRK HYVMRK XLI RMRIXMIW� % WXYH] F] &SSRI ERH 1EYVIP �� YWIW XLI YRIQTPS]QIRX

VEXI EW ER MRHMGEXSV SJ VIEP GSRZIVKIRGI MR E WEQTPI MRGPYHMRK XLI 'ÎGL 6ITYFPMG� ,YRKEV]�

4SPERH ERH JMRHW TSWMXMZI GSVVIPEXMSR GSIJJMGMIRXW SJ YRIQTPS]QIRX VEXIW FIX[IIR XLIWI

GSYRXVMIW� +IVQER] ERH XLI )9� -R SVHIV XS QIEWYVI XLI W]QQIXV] SJ FYWMRIWW G]GPIW� &SSRI

ERH 1EYVIP �� PSSO EX ZEVMEXMSRW SJ YRIQTPS]QIRX VEXIW JMRHMRK EKEMR TSWMXMZI

GSVVIPEXMSR GSIJJMGMIRXW � GSRXIQTSVERISYW ERH PEKKIH � SJ YRIQTPS]QIRX FIX[IIR XLIWI

GSYRXVMIW ERH +IVQER]� ERH � XS E PIWWIV I\XIRX � FIX[IIR '))'W ERH XLI )9� 8LI WEQI

EYXLSVW WLS[ XLEX XLI GSVVIPEXMSR SJ MRHYWXVMEP TVSHYGXMSR FYWMRIWW G]GPIW MR XLI '))'�� M�I�

MRGPYHMRK &YPKEVME� [MXL +IVQER] MW EP[E]W TSWMXMZI ERH LMKLIV XLER XLI GSVVIPEXMSR SJ XLI

)9 [MXL +IVQER]� '))'�� GSVVIPEXMSR GSIJJMGMIRXW [MXL +IVQER] VERKI JVSQ �� MR

,YRKEV] XS �� MR XLI 'ÎGL 6ITYFPMG� GSQTEVIH [MXL E GSIJJMGMIRX IUYEP XS ��

FIX[IIR )9 ERH +IVQER]� 8LI GSVVIPEXMSR SJ MRHYWXVMEP TVSHYGXMSR FYWMRIWW G]GPIW HVSTW

[LIR )9 MW XLI XIVQ SJ VIJIVIRGI� FYX GSVVIPEXMSR GSIJJMGMIRXW VIQEMR EP[E]W TSWMXMZI� -R

EHHMXMSR� &SSRI ERH 1EYVIP �� WLS[ XLEX YRIQTPS]QIRX HIXVIRHIH G]GPIW MR JSYV

'))'W �XLI 'ÎGL 6ITYFPMG� ,YRKEV]� 4SPERH ERH 7PSZEO 6ITYFPMG� EVI PEVKIP] I\TPEMRIH F]

+IVQER WLSGOW ERH� XS E PIWWIV I\XIRX� F] )YVSTIER WLSGOW�

*MHVQYG ERH 7GLEVHE\ �� JMRH VIWYPXW [LMGL EVI WMQMPEV XS &SSRI ERH 1EYVIP �� JSV

XLI GSVVIPEXMSR SJ FYWMRIWW G]GPIW � QIEWYVIH EW XLI GSVVIPEXMSR SJ HIXVIRHIH MRHYWXVMEP

TVSHYGXMSR � SJ ,YRKEV] ERH 4SPERH [MXL +IVQER]� FYX XLI] JMRH E [IEOIV GSVVIPEXMSR SJ

FYWMRIWW G]GPIW FIX[IIR XLI 'ÎGL 6ITYFPMG ERH +IVQER]� -R KIRIVEP� XLI VIWYPXW SJ XLIWI

WXYHMIW EVI WIRWMXMZI XS XLI WIPIGXMSR SJ XLI MRHMGEXSV SJ GSRZIVKIRGI ERH EVI RIKEXMZIP]

EJJIGXIH F] E WLSVX SFWIVZEXMSR TIVMSH� 'SRWMHIVMRK XLEX XLIWI GSYRXVMIW GSYPH NSMR XLI

)YVSTIER 9RMSR MR JI[ ]IEVW� MX MW PSKMGEP XS I\TIGX E KVIEXIV XVEHI MRXIKVEXMSR SJ '))'W

[MXL XLI )9� [LMGL WLSYPH TSWMXMZIP] MRJPYIRGI XLI W]RGLVSRMWEXMSR SJ FYWMRIWW G]GPIW��

��

�

7YQQMRK YT� XLMW TVIPMQMREV] EREP]WMW MRHMGEXIW XLEX XLVII SYX SJ XLI JSYV GSYRXVMIW MR XLI

WEQTPI WEXMWJ] XLI JYRHEQIRXEP 3'% GVMXIVME� &YPKEVME� XLI 'ÎGL 6ITYFPMG� ERH ,YRKEV] EVI

WQEPP STIR IGSRSQMIW ERH� LIRGI� JYPJMP XLI JMVWX FEWMG GVMXIVME SJ XLI 3'% XLISV]� 8LIVI MW

IZMHIRGI SJ JPI\MFPI PEFSYV QEVOIXW MR &YPKEVME� XLI 'ÎGL 6ITYFPMG ERH ,YRKEV]� ERH

24 See the discussion in section 1 on the endogeneity of the optimum currency area criteria.

33

IZMHIRGI SJ E WMKRMJMGERX GSVVIPEXMSR SJ FYWMRIWW G]GPIW FIX[IIR XLI '))'�� ERH +IVQER]�

ERH r XS E PIWWIV I\XIRX r FIX[IIR XLI '))'�� ERH XLI )9� 8LI ETTPMGEXMSR SJ XLI GPEWWMGEP

3'% ETTVSEGL VEMWIW WSQI HSYFX SR 4SPERH� 3R XLI SRI LERH� )9 MW XLI QEMR XVEHMRK

TEVXRIV SJ 4SPERH ERH XLI +IVQER IGSRSQMG G]GPI WYFWXERXMEPP] MRJPYIRGIW XLI 4SPMWL

FYWMRIWW G]GPI� 3R XLI SXLIV LERH� 4SPERH LEW E QIHMYQ WMÎ IGSRSQ]� [LMGL MW VIPEXMZIP]

QSVI GPSWIH XS JSVIMKR XVEHI XLER XLI SXLIV '))'W� 1SVISZIV� MX HSIW RSX WIIQ XLEX 4SPERH

LEW E ZIV] JPI\MFPI PEFSYV QEVOIX� 8LIVIJSVI� EGGSVHMRK XS XLI XVEHMXMSREP 3'% GVMXIVME� XLI

EHSTXMSR SJ XLI IYVS MR 4SPERH GSYPH MRZSPZI WSQI VIEP GSWXW�

6. Initial requirements for euroisation in the CEEC-4

8LI HIGMWMSR XS EHSTX E GSVRIV WSPYXMSR� WYGL EW E GYVVIRG] FSEVH SV IYVSMWEXMSR� HSIW RSX

VIWX YRMUYIP] SR XLI XVEHMXMSREP STXMQYQ GYVVIRG] EVIE GVMXIVME� %W WLS[R MR WIGXMSR �� XLMW

GLSMGI EPWS HITIRHW SR TEVXMGYPEV MRMXMEP GSRHMXMSRW SJ XLI IGSRSQ]� 8S [LEX I\XIRX HS XLI

'))'�� JYPJMP XLIWI MRMXMEP VIUYMVIQIRXW#

8LI JMVWX GSRHMXMSR JSV IYVSMWEXMSR MW XLI HIWMVI XS TVSQSXTVSQSXI II IGSGSRRSQSQMMGG MMRXRXIIKKVVEEXXMSMSRR[MXL XLI

GSYRXVMIW SJ XLI IYVS EVIE� %W WLS[R MR XEFPI �� XLI HIKVII SJ XVEHI MRXIKVEXMSR SJ XLI '))'�

� [MXL XLI )9 MW EPVIEH] LMKL ERH &YPKEVME SRP] WIIQW XS LEZI JYVXLIV WGSTI JSV VIHMVIGXMSR

SJ XVEHI XS[EVHW XLI )9��

��%TEVX JVSQ &YPKEVME r [LMGL� LS[IZIV� MW TIKKIH XS XLI IYVS

XLVSYKL XLI GYVVIRG] FSEVH r I\TIGXIH KEMRW WXIQQMRK JVSQ MRGVIEWIH XVEHI MRXIKVEXMSR

WLSYPH RSX FI TEVXMGYPEVP] WMKRMJMGERX MR XLI FEPERGI SJ GSWXW ERH FIRIJMXW SJ IYVSMWEXMSR�

% WIGSRH GSRHMXMSR XLEX JEGMPMXEXIW XLI EHSTXMSR SJ E JSVIMKR GYVVIRG] EW PIKEP XIRHIV� SV XLI

MRXVSHYGXMSR SJ E GYVVIRG] FSEVH� MW XLXLII RIRIIIHH XSXS MMQQTTSSVVX QSRIX QSRIXXEEVV] W] WXXEFMEFMPPMXMX]]��-R GSYRXVMIW [MXL

E LMWXSV] SJ LMKL MRJPEXMSR� [LIVI KSZIVRQIRXW QMWYWIH QSRIXEV] TSPMG] XS JMRERGI FYHKIX

HIJMGMXW� MX [MPP FI IEWMIV XS JMRH XLI RIGIWWEV] TSPMXMGEP GSRWIRWYW XS VIPMRUYMWL QSRIXEV]

WSZIVIMKRX]� -R &YPKEVME� XLI �� JMRERGMEP GVMWMW ERH XLI JSPPS[MRK LMKL MRJPEXMSR TEZIH XLI

[E] JSV XLI EHSTXMSR SJ XLI GYVVIRG] FSEVH MR QMH�� ERH XLI GSRWIUYIRX VIWXSVEXMSR SJ

QSRIXEV] WXEFMPMX]�

25 The EU member countries which did not join the euro area are not main trading partners of the CEEC-4.

34

,MKL MRJPEXMSR MW RSX GYVVIRXP] E QENSV TVSFPIQ MR XLI '))'�� WII XEFPI �� 7MRGI �� XLI

'))'�� LEZI GSRWMWXIRXP] EZSMHIH HVEQEXMG YTWYVKIW MR MRJPEXMSR ERH LEZI TVSKVIWWMZIP]

ETTVSEGLIH r MR ,YRKEV] � SV EGLMIZIH SRI�HMKMX MRJPEXMSR VEXIW r MR XLI 'ÎGL 6ITYFPMG�

4SPERH ERH &YPKEVME��

��8LMW VIWYPX HSIW RSX RIGIWWEVMP] QIER XLEX QSRIXEV] TSPMG] GVIHMFMPMX]

LEW MRGVIEWIH MR XLIWI GSYRXVMIW� -X WMQTP] LMKLPMKLXW XLEX� EX TVIWIRX� I\TIGXIH KEMRW MR XIVQW

SJ TVMGI WXEFMPMX] [SYPH RSX FI PEVKI MR GEWI SJ IYVSMWEXMSR� 8LIVIJSVI� E GEWI JSV IYVSMWEXMSR

FEWIH SR XLI HIWMVI XS VI�IWXEFPMWL QSRIXEV] WXEFMPMX] [SYPH RSX FI ETTVSTVMEXI JSV XLIWI JSYV

GSYRXVMIW�

8EFP8EFPI �I �� -R-RJJPPEEXXMMSR �SR �IRIRH SH SJJ TITIVVMMSSHH�� rr ��

��

��

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35

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28 See for instance Fischer (2001, p.16). 29 “Market participants suggest foreign banks will likely examine whether or not to inject capital on a case-by-case basis, trading off future value (including reputational effects) against cost. Minority shareholders are viewed as less likely to make capital injection during periods of financial stress.” – IMF (2000, p.170).

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42

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34 Since 1997, average annual interest rates (see table 10 for definitions) steadily dropped in all the four countries, apart from an upsurge of interest rates in Poland during 2000. In Poland, reserve requirement ratios were lowered in September 1999 from 20% to 5% and from 11% to 5% for zloty demand deposits and zloty time deposits respectively; this change produced a 20% reduction of the base money in that month. In the Czech Republic minimum reserve requirements on demand and savings deposits fell from 11.5% in 1996 to 2% in 1999.

43

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35 Structural problems did not allow a full convergence of Bulgarian lending rates towards German rates. During the period 1997-2000, intermediation spreads in Bulgaria – measured as the difference between lending and deposit rates - were significantly higher than in the Czech Republic, Hungary and Poland. These high spreads are the result of the low level of banking lending to private sector. Private sector credit amounted to only 12 percent of GDP at the end of 1999, which is a low value compared with other transition countries or with countries with a similar level of GDP per capita. This problem is due to several factors: the banking crisis in 1996-97, economic restructuring, lack of competition in the banking sector and imperfect legal environment (see IMF Staff Country Report, 2000).

45

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36 Note that these yields on long-term Bulgarian bonds cannot straightforwardly be compared with yields on 5-year bonds in the Czech Republic, Hungary and Poland, since maturity is different.

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49

8. Conclusion

9RMPEXIVEP IYVSMWEXMSR MW E VMWO] WXVEXIK] [MXL QSVI FMRHMRK GSRWXVEMRXW ERH QSVI I\TIGXIH

FIRIJMXW GSQTEVIH [MXL ER EPXIVREXMZI I\GLERKI VEXI EVVERKIQIRX� -X RIIHW E WXVSRK TSPMXMGEP

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VMWO� 4VSZMHIH XLEX XLI HIJEYPX VMWO HSIW RSX MRGVIEWI� XLI IPMQMREXMSR SJ XLI GYVVIRG] VMWO

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EZSMH GETMXEP JPS[ VIZIVWEPW ERH [SYPH RSX VIHYGI XLI GSWX SJ FSVVS[MRK SR XLI MRXIVREXMSREP

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References

&IKK� (EZMH �� l4IKKMRK 3YX� 0IWWSRW JVSQ XLI 'ÎGL )\GLERKI 6EXI 'VMWMWz� ')46

(MWGYWWMSR 4ETIV 2S� �� 'IRXVI JSV )GSRSQMG 4SPMG] 6IWIEVGL� 0SRHSR �7ITXIQFIV��

&IVK� %RHVI[ ERH )HYEVHS &SVIRW^XIMR ��E�� l8LI 'LSMGI SJ )\GLERKI 6EXI 6IKMQI ERH

1SRIXEV] 8EVKIX MR ,MKLP] (SPPEVMÎH )GSRSQMIWz� -1* ;SVOMRK 4ETIV 2S� ��

-RXIVREXMSREP 1SRIXEV] *YRH� ;EWLMRKXSR (' �*IFVYEV]��

&IVK� %RHVI[ ERH )HYEVHS &SVIRW^XIMR ��F�� l8LI 4VSW ERH 'SRW SJ *YPP (SPPEVMÊXMSRz�

-1* ;SVOMRK 4ETIV 2S� �� -RXIVREXMSREP 1SRIXEV] *YRH� ;EWLMRKXSR (' �1EVGL��

&SSRI� 0EYVIRGI ERH 1EXLMPHI 1EYVIP �� l)GSRSQMG 'SRZIVKIRGI SJ XLI '))'W [MXL

XLI )9z� ')46 (MWGYWWMSR 4ETIV 2S� �� 'IRXVI JSV )GSRSQMG 4SPMG] 6IWIEVGL� 0SRHSR

�2SZIQFIV��

&SSRI� 0EYVIRGI ERH 1EXLMPHI 1EYVIP �� l%R 3TXMQEP 'YVVIRG] %VIE 4IVWTIGXMZI SJ

XLI )9 )RPEVKIQIRX XS XLI '))'Wz� ')46 (MWGYWWMSR 4ETIV 2S� �� 'IRXVI JSV )GSRSQMG

4SPMG] 6IWIEVGL� 0SRHSR �1EVGL��

&VYRS� 1MGLEIP �� l,MKL MRJPEXMSR ERH XLI RSQMREP ERGLSVW SJ ER STIR IGSRSQ]z�

2&)6 ;SVOMRK 4ETIV 2S� �� 2EXMSREP &YVIEY SJ )GSRSQMG 6IWIEVGL� 'EQFVMHKI 1%

�2SZIQFIV��

&YMXIV� ;MPPIQ ,� �� l3TXMQEP 'YVVIRG] %VIEW� ;L] (SIW XLI )\GLERKI 6EXI 6IKMQI

1EXXIV#z� ')46 (MWGYWWMSR 4ETIV 2S� �� 'IRXVI JSV )GSRSQMG 4SPMG] 6IWIEVGL� 0SRHSR

�.ERYEV]��

'EPZS� +YMPPIVQS %� �� l3R (SPPEVMÊXMSRz� 1MQIS� 9RMZIVWMX] SJ 1EV]PERH �%TVMP��

8VERWGVMTX EZEMPEFPI SRPMRI EX LXXT��[[[�FWSW�YQH�IHY�IGSR�GMIGTR��THJ�

55

'EPZS� +YMPPIVQS %� �� l'ETMXEP 1EVOIXW ERH XLI )\GLERKI 6EXI� ;MXL 7TIGMEP

6IJIVIRGI XS XLI (SPPEVMÊXMSR (IFEXI MR 0EXMR %QIVMGEz� 1MQIS� 9RMZIVWMX] SJ 1EV]PERH

�%TVMP��

8VERWGVMTX EZEMPEFPI SRPMRI EX LXXT��[[[�FWSW�YQH�IHY�IGSR�GMIGVT��THJ�

'EPZS� +YMPPIVQS %� ERH 'EVQIR 1� 6IMRLEVX �� l*IEV SJ *PSEXMRKz� 1MQIS�

9RMZIVWMX] SJ 1EV]PERH �7ITXIQFIV��

8VERWGVMTX EZEMPEFPI SRPMRI EX LXXT��[[[�FWSW�YQH�IHY�IGSR�GMIGVT��THJ�

(VEÎR� %PPIR �� l% +IRIVEP 1IEWYVI SJ -RJPEXMSR 8E\ 6IZIRYIWz� )GSRSQMG 0IXXIVW

��

)&6( 8VERWMXMSR 6ITSVX �� )YVSTIER &ERO JSV 6IGSRWXVYGXMSR ERH (IZIPSTQIRX�

0SRHSR� �2SZIQFIV��

)' 'SQQMWWMSR �� l3RI 1EVOIX� 3RI 1SRI]z� )YVSTIER )GSRSQ]� ��

)'3*-2 �� l6ITSVX F] XLI �)GSJMR� 'SYRGMP XS XLI )YVSTIER 'SYRGMP MR 2MGI SR XLI

)\GLERKI 6EXI %WTIGXW SJ )RPEVKIQIRXz� 'SYRGMP SJ XLI )YVSTIER 9RMSR� 4VIWW 6IPIEWI ��

2SZIQFIV��

)MGLIRKVIIR� &EVV] �� l7LSYPH XLI 1EEWXVMGLX 8VIEX] &I 7EZIH#z� 4VMRGIXSR 7XYHMIW MR

-RXIVREXMSREP *MRERGI 2S� �� -RXIVREXMSREP *MRERGI 7IGXMSR� (ITEVXQIRX SJ )GSRSQMGW�

4VMRGIXSR 9RMZIVWMX] �(IGIQFIV��

)MGLIRKVIIR� &EVV]� �� l;LIR XS (SPPEVMÎz� 4ETIV TVITEVIH JSV XLI -8%1

(SPPEVMÊXMSR 4VSNIGX QIIXMRK MR 1I\MGS 'MX]� �� (IGIQFIV �� *IFVYEV]��

*MHVQYG� .EVOS ERH *VER^ 7GLEVHE\ �� l1SVI D4VI�-RW %RXI 4SVXEW# )YVS %VIE

)RPEVKIQIRX� 3TXMQYQ 'YVVIRG] %VIE� ERH 2SQMREP 'SRZIVKIRGIz� *SGYW SR 8VERWMXMSR

2S�� %YWXVMER 2EXMSREP &ERO�

56

*MWGLIV� 7XERPI] �� l7IMKRMSVEKI ERH XLI 'EWI JSV E 2EXMSREP 1SRI]z� .SYVREP SJ

4SPMXMGEP )GSRSQ]� ��

*MWGLIV� 7XERPI] �� l)\GLERKI 6EXI 6IKMQIW� -W XLI &MTSPEV :MI[ 'SVVIGX#z� TETIV

TVITEVIH JSV XLI QIIXMRKW SJ XLI %QIVMGER )GSRSQMG %WWSGMEXMSR� 2I[ 3VPIERW �� .ERYEV]��

*VEROIP� .IJJVI] %� �� l2S 7MRKPI 'YVVIRG] 6IKMQI -W 6MKLX JSV %PP 'SYRXVMIW SV EX %PP

8MQIWz� 2&)6 ;SVOMRK 4ETIV 2S�� 2EXMSREP &YVIEY SJ )GSRSQMG 6IWIEVGL�

'EQFVMHKI 1% �7ITXIQFIV��

*VEROIP� .IJJVI] %� ERH %RHVI[ /� 6SWI� �� l8LI )RHSKIRIMX] SJ XLI 3TXMQYQ

'YVVIRG] %VIE 'VMXIVMEz� 8LI )GSRSQMG .SYVREP �� .YP]��

+LSWL� %�� %�1� +YPHI ERH ,� '� ;SPJ �� l'YVVIRG] &SEVHW� 1SVI XLER E 5YMGO

*M\#z� )GSRSQMG 4SPMG] �� 3GXSFIV��

+MEZE^^M� *� ERH 1� 4EKERS �� l8LI %HZERXEKI SJ 8]MRK 3RIW ,ERHW� )17 (MWGMTPMRI

ERH 'IRXVEP &ERO 'VIHMFMPMX]z� )YVSTIER )GSRSQMG 6IZMI[ �� .YRI��

+VSW� (ERMIP �� l%R IGSRSQMG W]WXIQ JSV TSWX�[EV 7SYXL�)EWX )YVSTIz� GSQTERMSR

TETIV SJ ')47 ;( 2S� �� &VYWWIPW�

+VSW� (ERMIP ERH +Y] :ERHMPPI �� l7IMKRMSVEKI ERH )19� 8LI *MWGEP -QTPMGEXMSRW SJ

4VMGI 7XEFMPMX] ERH *MRERGMEP 1EVOIX -RXIKVEXMSRz� .SYVREP SJ 'SQQSR 1EVOIX 7XYHMIW� :SP�

�� 2S� � �.YRI��

,SGLVIMXIV� )HYEVH� 6� 6SZIPPM ERH +� ;MRGOPIV �� l'IRXVEP &EROW ERH 7IMKRMSVEKI� %

7XYH] SJ 8LVII )GSRSQMIW MR 8VERWMXMSRz� )YVSTIER )GSRSQMG 6IZMI[ ��

-1* �� l-RXIVREXMSREP 'ETMXEP 1EVOIXW� (IZIPSTQIRXW� 4VSWTIGXW ERH /I] 4SPMG]

-WWYIWz� -RXIVREXMSREP 1SRIXEV] *YRH� ;EWLMRKXSR ('� �7ITXIQFIV��

-1* %RRYEP 6ITSVX �� -RXIVREXMSREP 1SRIXEV] *YRH� ;EWLMRKXSR ('�

57

-1* %RRYEP 6ITSVX SR )\GLERKI %VVERKIQIRX ERH )\GLERKI 6IWXVMGXMSRW ��

-RXIVREXMSREP 1SRIXEV] *YRH� ;EWLMRKXSR ('�

-1* 7XEJJ 'SYRXV] 6ITSVX �� l&YPKEVME� 7IPIGXIH -WWYIW ERH 7XEXMWXMGEP %TTIRHM\z� -1*

7XEJJ 'SYRXV] 6ITSVX 2S�� -RXIVREXMSREP 1SRIXEV] *YRH� ;EWLMRKXSR (' �%TVMP�

-1* ;SVPH )GSRSQMG 3YXPSSO �� -RXIVREXMSREP 1SRIXEV] *YRH� ;EWLMRKXSR ('�

.)' �� l&EWMGW SJ (SPPEVMÊXMSRz� .SMRX )GSRSQMG 'SQQMXXII 7XEJJ 6ITSVX� 3JJMGI SJ XLI

'LEMVQER� 'SRRMI 1EGO� 9RMXIH 7XEXIW 7IREXI �.ERYEV]��

/IRIR� 4�&� �� l8LI 8LISV] SJ 3TXMQYQ 'YVVIRG] %VIEW� ER )GPIGXMG :MI[z� MR 6�%�

1YRHIPP ERH %�/� 7[SFSHE IHW�� 1SRIXEV] 4VSFPIQW SJ XLI -RXIVREXMSREP )GSRSQ]�

'LMGEKS� 9RMZIVWMX] SJ 'LMGEKS 4VIWW�

/¸LPIV� ,SVWX �� l2I[ 'LEPPERKIW JSV )\GLERKI 6EXI 4SPMG]z� 6IQEVOW F] XLI

1EREKMRK (MVIGXSV SJ XLI -RXIVREXMSREP 1SRIXEV] *YRH EX XLI %WME�)YVSTI �%7)1� 1IIXMRK

SJ *MRERGI 1MRMWXIVW� /SFI� .ETER �.ERYEV] ��

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IHW�� %HNYWXQIRX ERH +VS[XL MR XLI )YVSTIER 1SRIXEV] 9RMSR� 'EQFVMHKI� 'EQFVMHKI

9RMZIVWMX] 4VIWW� ��

0YGEW� 6SFIVX )� �� l)GSRSQIXVMG 4SPMG] )ZEPYEXMSR� % 'VMXMUYIz� MR /� &VYRRIV ERH %�

1IPXÎV IHW�� 8LI 4LMPPMTW 'YVZI ERH 0EFSV 1EVOIXW� 'EVRIKMI�6SGLIWXIV 'SRJIVIRGI 7IVMIW

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1EWWSR� 4EYP 6� �� l1SRIXEV] ERH )\GLERKI 6EXI 4SPMG] SJ 8VERWMXMSR )GSRSQMIW SJ

'IRXVEP ERH )EWXIVR )YVSTI EJXIV XLI 0EYRGL SJ )19z� -1* 4SPMG] (MWGYWWMSR 4ETIV 2S� ��

-RXIVREXMSREP 1SRIXEV] *YRH� ;EWLMRKXSR (' �.YP]��

58

1YRHIPP� 6SFIVX %� �� l% 8LISV] SJ 3TXMQYQ 'YVVIRG] %VIEWz� %QIVMGER )GSRSQMG

6IZMI[ �� 7ITXIQFIV��

1G/MRRSR� 6SREPH -� �� l3TXMQYQ 'YVVIRG] %VIEWz� %QIVMGER )GSRSQMG 6IZMI[ ��

�7ITXIQFIV��

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FIJSVI SV MRWXIEH SJ )19 1IQFIVWLMTz� '2)1 (MWGYWWMSR 4ETIV 2S� �� 'IRXVI JSV 2I[

ERH )QIVKMRK 1EVOIXW� 0SRHSR &YWMRIWW 7GLSSP �7ITXIQFIV��

3FWXJIPH� 1EYVMGI ERH /IRRIXL 6SKSJJ �� l8LI 1MVEKI SJ *M\IH )\GLERKI 6EXIWz�

.SYVREP SJ )GSRSQMG 4IVWTIGXMZIW� :SP� �� 2S� �� *EPP��

6IMRLEVX� 'EVQIR �� l8LI 1MVEKI SJ *PSEXMRK )\GLERKI 6EXIWz� %QIVMGER )GSRSQMG

6IZMI[� %)% 4ETIVW ERH 4VSGIIHMRKW� �� 1E]��

6SWI� %RHVI[ /� �� l3RI 1SRI]� 3RI 1EVOIX� )WXMQEXMRK XLI )JJIGX SJ 'SQQSR

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6SYFMRM� 2SYVMIP �� l8LI 'EWI %KEMRWX 'YVVIRG] &SEVHW� (IFYROMRK �� 1]XLW EFSYX

XLI &IRIJMXW SJ 'YVVIRG] &SEVHWz� 1MQIS� 7XIVR 7GLSSP SJ &YWMRIWW� 2I[ =SVO 9RMZIVWMX]

�*IFVYEV]��

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-RXIVREXMSREP 8VEHI ERH *MRERGIz� 97 8VIEWYV] 4VIWW 6IPIEWI� �%TVMP �� %ZEMPEFPI SRPMRI EX

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)GSRSQ]� :SP� �� 2S� � �2SZIQFIV��

59

8IQTVERS�%VVS]S� ,IPMSHSVS ERH 6SFIVX %� *IPHQER �� l7IPIGXIH 8VERWMXMSR ERH

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