Working Paper: CEPR ID: DP2018
Authors: Laurence Boone; Mathilde Maurel
Abstract: This paper tries to assess how costly it would be for the CEECs to peg their exchange rates to the Euro. We use three types of criteria: institutional (the Maastricht criteria); some measure of real convergence; and the Optimal Currency Area criteria. The institutional criteria seem to be an important impediment to an 'immediate' accession. There is also a lot more to do in terms of real convergence. Finally, the correlations of industrial production and unemployment cycles in the CEECs and the EU, or other reference countries, such as Germany, Greece, France and Portugal point towards a deeper integration of the CEECs with Germany than with the EU. This reflects the old ties Germany had and still has with Eastern countries and the likely key role Germany is going to play in the process of EU enlargement to Eastern Europe.
Keywords: eastern enlargement; economic convergence; optimal currency area
JEL Codes: E32; F3; F42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| institutional criteria (Maastricht criteria) (F55) | immediate accession of CEECs to the EU (F15) |
| real convergence (GDP and unemployment rates) (O47) | alignment with EU economic standards (F55) |
| correlation of industrial production and unemployment cycles between CEECs and Germany (N14) | economic alignment with Germany (F55) |