scholarly journals MONETARY CHALLENGES OF EMERGING EUROPEAN ECONOMIES TOWARDS THE EURO ZONE

TEME ◽  
2020 ◽  
pp. 883
Author(s):  
Emilija Beker Pucar
Keyword(s):  
Exchange Rate ◽  
Monetary Union ◽  
Capital Inflows ◽  
Smooth Transition ◽  
Target Zone ◽  
Waiting Room ◽  
Euro Zone ◽  
Real Convergence ◽  
Floating Exchange Rate ◽  
European Economies

The paper aims to highlight the main difficulties on the monetary path towards the euro zone experienced by Emerging Europe. Emerging European Economies (EEEs), EU members, adopted either double shift or smooth transition monetary approach towards the euro zone. Double shift assumes changes from floating exchange rate regimes (ERRs) to the ERM II target zone and, finally, monetary union as a rigid ERR. The smooth transition is practiced by economies with mainly rigid ERRs before the ERM II entrance and, at the end, again rigid ERR of a monetary union. Despite chosen monetary path towards the euro zone, crucial difficulties or aggravating factors could be identified in the form of real exchange rate appreciation due to productivity growth or capital inflows. A reconciliation of inflation and exchange rate target zone is extremely complex, at the same time striving not to jeopardize the real convergence. What is stressed here is the vicious cycle between real and nominal convergence as the reason why the ERM II target should be regarded as a “waiting room“ not as a “training room“ in the pre-EMU phase. 

scholarly journals Bulgaria in the Eurozone – Other Countries’ Experience and Comparisons

2021 ◽  
Vol 27 (2) ◽  
pp. 109-126
Keyword(s):  
Monetary Union ◽  
Economic Indicators ◽  
Actual Data ◽  
Banking Union ◽  
Baltic Countries ◽  
Real Convergence ◽  
European Economies

On July 10 2020 Bulgaria joined the preparatory mechanism for the Eurozone ERM II, but the opinions expressed are still divided. The author’s opinion is that in the debate for or against Bulgaria joining the Eurozone, the actual data provides the strongest arguments. Economic indicators and facts about five former socialist countries that are already in the Eurozone are presented in the paper. There are solid arguments in favor of joining in the analysis of the three Baltic countries – Estonia, Latvia and Lithuania, as well as Slovenia and Slovakia. These countries’ development as part of the monetary union and their economic indicators after this important step show their goal for real convergence with developed European economies. The author accepts two issues as especially important – what happens to inflation in these economies after joining the Eurozone and what the comparison concerning real convergence shows. Croatia, along with Bulgaria, has become a part of ERM II and the Banking Union, hence why it is also included in the analysis.

scholarly journals Domestic consumption and uncertainty of exchange rate in a Monetary union: Evidence from the Euro area

2021 ◽  
Vol 18 (1) ◽  
pp. 151-172
Author(s):  
Samuel Okafor ◽  
Juste Lokossou
Keyword(s):  
Exchange Rate ◽  
Monetary Union ◽  
Correction Coefficient ◽  
Equilibrium Path ◽  
Exchange Rate Uncertainty ◽  
Euro Zone ◽  
Pooled Mean Group ◽  
Long Run ◽  
Short Run ◽  
Long Run Equilibrium

The research seeks to uncover how real consumption reacts to real exchange rate uncertainty in the short and long run for the world's largest monetary union the Euro zone. Twelve Euro zone countries were sampled covering the period 1995Q1-2019Q4. Using generalized autoregressive conditional heteroskedasticity (GARCH) and pooled mean group (PMG), the result shows that exchange rate uncertainty significantly dampens long-run consumption while the short-run effect is mixed. In the benchmark model, a negative and significant error correction coefficient was obtained, which allows to argue that i) there is evidence of a return to the long-run equilibrium path for consumption following short run deviations and ii) the speed of adjustment to equilibrium is low, with a coefficient of ~ 4%. This suggests that, in the Euro zone, convergence to long-run equilibrium is slow, as the proportion of disequilibrium corrected in one quarter, following a shock, is about 4%, which implies it would take ~17 quarters for one half of the disequilibrium, or deviations from the long-run consumption path to become corrected.

Effectiveness of capital controls in dampening international shocks

2021 ◽  
Vol 9 (4) ◽  
pp. 521-551
Author(s):  
Chokri Zehri
Keyword(s):  
Exchange Rate ◽  
Capital Flows ◽  
Capital Controls ◽  
Capital Inflows ◽  
Monetary Shocks ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Floating Exchange Rate ◽  
Exchange Rate Shocks ◽  
International Shocks

This study is a contribution to the ongoing debate on whether capital controls are effective in buffering international shocks and reducing capital flows volatility. The author demonstrates that capital controls can considerably mitigate the effects of monetary and exchange rate shocks and reduce the volatility of capital inflows to emerging markets. This study analyses quarterly data of 28 emerging economies over the period between 2000 and 2015 and proposes two methods to identify capital controls actions. Using panel analysis, autoregressive distributed lag, and local projections approaches, this study finds that tighter capital controls may diminish monetary and exchange rate shocks and reduce capital inflows volatility. Furthermore, capital controls respond anti-cyclically to monetary shocks. Under capital controls, countries with floating exchange rate regimes have more potential to buffer monetary shocks. The author also finds that capital controls on inflows are more effective for reducing the volatility of capital flows compared to capital controls on outflows.

Fear of Free Floating or Forced Exchange Rate Fixing

2004 ◽  
pp. 112-122
Author(s):  
O. Osipova
Keyword(s):  
Exchange Rate ◽  
Financial Crisis ◽  
Exchange Rates ◽  
Inflation Targeting ◽  
Exchange Rate Policy ◽  
Float Exchange Rate ◽  
Floating Exchange Rate ◽  
Rate Policy ◽  
Exchange Rate Arrangements ◽  
Pass Through

After the financial crisis at the end of the 1990 s many countries rejected fixed exchange rate policy. However actually they failed to proceed to announced "independent float" exchange rate arrangement. This might be due to the "fear of floating" or an irreversible result of inflation targeting central bank policy. In the article advantages and drawbacks of fixed and floating exchange rate arrangements are systematized. Features of new returning to exchange rates stabilization and possible risks of such policy for Russia are considered. Special attention is paid to the issue of choice of a "target" currency composite which can minimize external inflation pass-through.

Exchange Rate Regimes and Economic Stability

2010 ◽  
pp. 29-43
Author(s):  
S. Smirnov
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Exchange Rate Regime ◽  
Exchange Rate Policy ◽  
Real Sector ◽  
Economic Stability ◽  
Exogenous Shocks ◽  
Floating Exchange Rate ◽  
Rate Policy ◽  
Managed Floating

The Bank of Russia intends to introduce inflation targeting policy and exchange rate free floating regime in three years. Exogenous shocks absorption which stabilizes the real sector of economy is usually considered to be one of the advantages of free floating exchange rate policy. However, our research based on the analysis of 25 world largest economies exchange rates and industrial production during the crisis of 2008-2009 does not confirm this hypothesis. The article also analyzes additional risks associated with free floating exchange rate regime in Russia and presents some arguments in favor of managed floating exchange rate regime.

South Africa’s Trade Performance under Alternative Exchange Rate Regimes

2018 ◽  
Vol 10 (6) ◽  
pp. 261
Author(s):  
Romaine Patrick ◽  
Phocenah Nyatanga
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Exchange Rate Regime ◽  
Real Exchange Rates ◽  
Series Data ◽  
Growth Strategies ◽  
The Real ◽  
Real Price ◽  
Floating Exchange Rate

This study examined the effect exchange rates have on import and export volumes under alternative exchange rate policies adopted in South Africa over the period 1960 to 2017. Using quarterly time series data for the stated period, a log-linear error correction model is employed to estimate the country’s export and import elasticities, taking into account Gross Domestic Product (GDP), the real price of exports, the real price of imports and real exchange rates. Using the freely floating exchange rate regime as the base period, the study concluded that both export and import volumes are lower under a system of fixed exchange rates. Export and import volumes were also found to be lower under the dual exchange rate regime, relative to the freely floating exchange rate regime. In accordance with export-led growth strategies, exports were found to be higher and imports lower under a managed floating exchange rate regime. It is therefore recommended that South Africa revert to a more managed exchange rate regime, until the South African economy is developed to accommodate a freely floating exchange rate regime.

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