Publication detail

Monetary Policy before Euro Adoption: Challenges for EU New Members

Author(s): prof. Roman Horváth Ph.D., Jan Filacek, Michal Skorepa
Type: Others
Year: 2006
Number: 0
Published in: William Davidson Institute Working Paper, No. 853, (also in IES FSV UK occasional papers, No. 5/2006)
Publishing place: University of Michigan
Keywords: monetary policy, euro adoption, ERM II, EU
JEL codes: E58, E52, F42, F33
Suggested Citation:
Abstract: This article analyzes the main issues for monetary policy in new EU member states before their euro adoption. These are typically rooted in the challenge of fulfilling concurrently of the Maastricht inflation and exchange rate criterion, as these countries are experiencing equilibrium real exchange rate appreciation. In this article we first distinguish between the wording, written interpretation and “revealed” interpretation of the inflation and exchange rate criteria. Then we discuss the options for monetary policy in the period of fulfilment of these criteria in terms of its transparency, its continuity with the previous monetary policy regime, the choice of central parity for the ERM II, the setting of the fluctuation bandwidth, the probability of fulfilment of both criteria and the impact on economic stability.


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