52,888 research outputs found
Exchange rate pass-through in new member states and candidate countries of the EU
This paper studies the pass-through of exchange rate changes into the prices of imports that originated inside the euro area made by some New Member States (NMSs) of the European Union and one candidate country (Turkey). I use data on import unit values for nine different product categories and bilateral imports from the euro area for each country and I estimate industry-specific rates of pass-through across and within countries using two different methodological approaches. The first one is based on Campa and GonzĂĄlez-MĂnguez (2006) which estimates the short- and long-run pass through elasticities, where long-run elasticities are defined as the sum of the pass-through coefficients for the contemporaneous exchange rate and its first four lags. The second one is employed by de Bandt, Banerjee and Kozluk (2007) which suggests a long-run Engle and Granger (1987) cointegrating relationship and the possibility of structural breaks to restore the long-run in the estimation. I did not find evidence either in favour of the hypothesis of Local Currency Pricing (zero pass-through) or the hypothesis of Producer Currency Pricing (complete pass-through) for all the countries except Slovenia and Cyprus in the latter. The exchange rate pass-through ranged from 0.090 to 2.916 in the short-run and from 0.102 to 2.242 in the long-run. With reference to the results by industry the lowest values for exchange rate pass-through are in Manufacturing sectors. However, I did observe a exchange rate pass-through decline through the pricing chain and a large dependence of their economies on imported input
Monetary Policy before Euro Adoption: Challenges for EU New Members
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 ârevealedâ 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.http://deepblue.lib.umich.edu/bitstream/2027.42/57233/1/wp853 .pd
Targeting Relative Inflation Forecast as Monetary Policy Framework for Adopting the Euro
This study proposes relative inflation forecast targeting as an operational framework of monetary policy for adopting the euro by the EU new Member States. This strategy assumes containing differentials between the domestic and the eurozone inflation forecasts as an operational target. A model prescribing the RIFT framework is presented along with a set of appropriate policy indicator variables and instrument rules. The proposed framework advances the strategy based on relatively strict inflation targeting that is currently pursued by some NMS. Several ARCHclass tests in various functional forms are employed for providing preliminary empirical evidence on convergence of inflation differentials relative to the euro area for Poland, Czech Republic and Hungary.http://deepblue.lib.umich.edu/bitstream/2027.42/40140/3/wp754.pd
Monetary Policy before Euro Adoption: Challenges for EU New Members
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 ârevealedâ 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.monetary policy, euro adoption, ERM II, EU
Opening the Capital Account of Transition Economies: How Much and How Fast
In the late eighties, many developing countries followed the example of the most advanced countries and opened their capital account (K.A.) in an attempt to reap new gains from increased integration with the world economy. By 2000, after the wave of financial and currency crises that hurt the global economy in the last decade, enthusiasm about K.A. liberalization has much faded. Firstly, the relationship between development and capital account liberalization did not come out to be as solid as initially expected; secondly, greater capital mobility has brought about increased global financial instability. New thinking in international economics calls for proper sequencing in opening the K.A.: liberalization should proceed in step with progress in macroeconomic stability, structural reform and creation of a sound internal financial system. In this paper, we analyze to what extent and at what pace should transition economies carry out the K.A. liberalization process.http://deepblue.lib.umich.edu/bitstream/2027.42/39896/3/wp511.pd
Targeting Relative Inflation Forecast as Monetary Policy Framework for Adopting the Euro
This study proposes relative inflation forecast targeting as an operational framework of monetary policy for adopting the euro by the EU new Member States. This strategy assumes containing differentials between the domestic and the eurozone inflation forecasts as an operational target. A model prescribing the RIFT framework is presented along with a set of appropriate policy indicator variables and instrument rules. The proposed framework advances the strategy based on relatively strict inflation targeting that is currently pursued by some NMS. Several ARCHclass tests in various functional forms are employed for providing preliminary empirical evidence on convergence of inflation differentials relative to the euro area for Poland, Czech Republic and Hungary.Inflation targeting; Monetary convergence; Euro adoption; EU new Member States.
Business cycle synchronization and insurance mechanisms in the EU
In this paper we provide a positive exercise on past business-cycle correlations and risk sharing in the European Union, and on the ability of insurance mechanisms and fiscal policies to smooth income fluctuations. The results suggest in particular that while some of the new Member States have well synchronized business cycles, for some of the other countries, business cycles are not yet well synchronized with the euro areaâs business cycle, and risk-sharing mechanisms may not provide enough insurance against shocks. JEL Classification: E32, E42, F41, F42business cycle synchronization, EU, Insurance Mechanisms, Optimum Currency Areas
Trade as international transmission mechanism of shocks: The case of Central Eastern European Countries
Alternative options for the monetary integration of Central and Eastern European EU accession countries
The final destination of monetary policy and integration for the Central and Eastern European EU accession countries is the joining of the euro area. The European union has affirmed that, according to the EC treaty, this will be possible, at the earliest, two years after EU accession. Against this background, the most important issue for the accession countries to decide whether to aim for an early introduction of the euro a few years after EU accession or to adopt for a more gradual strategy of monetary integration. This paper reviews the main arguments for and against either of this approaches. Thus the focus is on the question of how speedily to introduce the euro in the accession countries, within the standard path laid down in the EU accession regulations
A TEORETICAL APPROACH ON ERM II
This article presents an overview of the European Exchange Rate Mechanism and of the effects of this mechanism on the new Member States from the point of view of the stability of the exchange rate, of the convergence with the macroeconomic policy and of the inflation stabilization. There will be outlined the contradictions which may appear between the preparation of the EU accession conditions and those regarding the accession to EMU, with the intermediate stage ERM II, including the effect Balassa-Samuelson. Another important element is to set the central exchange rate for ERM II because this central exchange rate will be similar or almost similar with the future exchange rate as opposed to Euro.ERM II, exchange rate, exchange rate stability system reform,demographic evolution
- âŠ