OCA INDEX AS INDICATOR OF THE CZECH REPUBLIC'S PREPAREDNESS TO JOIN THE EUROPEAN MONETARY UNION

The optimum currency area (OCA) theory evaluates the currency area as optimum at a time when the participating countries are not at risk of macroeconomic instability due to the existence of a common currency. The OCA index is a tool used to comprehensively assess the costs and benefits of a candidate for joining a monetary union. It is constructed as a bilateral index assessing the appropriateness of introducing the single currency in two countries. The article presents the OCA index quantified for the Czech Republic in relation to Germany, which is considered to be the core of the European Monetary Union. Since the OCA index needs to be interpreted in a temporal or spatial comparison, the calculation of the OCA index was also performed for other countries of the Visegrad Group (V4) and furthermore for Austria and Portugal, using data from the period of 2007–2019. The results of the OCA index show a high degree of variability in the Czech Republic in the observed period. While in the first half of the period under review, the Czech Republic achieved the best results within the assessed economies and the Czech Republic's level of preparedness for the common currency with Germany was higher than in the case of Austria, it fell sharply after 2012. The reason can be seen, among other things, in the higher growth rate of the Czech economy than in the euro area. Although the OCA index is an indicator assessing the preparedness of an economy to join a monetary union, it cannot be the only indicator. Other important criteria include, for example, labour mobility, price and wage flexibility, fiscal integration and more. Although the Czech Republic is approaching the euro area average in all key indicators, the gap from it remains significant for most indicators and thus continues to be a factor against the adoption of the euro in the coming years.

Financial Integration in the Context of the European Union

As the world continues to see various facets of financial integration, the topic has sparked a great deal of discussions among policymakers and economists. The article analyzes benefits and risks of financial integration in the context of the European Union, which has facilitated global financial integration immensely by creating common currency among European Monetary Union countries and harmonizing regulations across the region. Upon examining main pros and cons of financial integration in detail, I conclude that financial integration can be beneficial in the longrun if corrective and preventive measures are enforced to curtail risks and threats it poses.

disintegration challenge of reforming the Eurozone

The main objective of this study is to analyze endogenous destabilizing and disintegration tendencies within the framework of the crisis of the European Monetary Union, which grew into a crisis in the real economy. This involved several EU members states at the same time. Achieving this goal requires addressing a number of theoretical and historical lessons, that point to an important dilemma for the survival of the European project in the future. Research methods include: systematic, procedural and situational approaches to the study of Eurozone countries and participants in the integration project and disintegration influences and an institutional approach to the detection and analysis of dysfunctional institutional configuration within the framework of the European Monetary Union. Of significant importance for the study of the problems of economic integration and disintegration was the use of the principles of universal scientific methodology. This included an integrated approach to problem solving, which envisaged a general vision of the movement of capital in the context of the European integration project. Also, the application of methods of logical models, induction and deduction. The unity of logic and history in the development of a research object confirming the synergistic effect of historical and theoretical lessons.

Centralized archiving and recordkeeping in a new institution: the European Monetary Institute and its Archives 1994-1998

In 1994, the European Monetary Institute (EMI) was established. Based first in Basel (Switzerland), and subsequently in Frankfurt am Main (Germany), the newly created institute was one of the most structurally significant outcomes of the 1992 Treaty of Maastricht and was intended to shepherd the creation of a new currency for the European Union - the Euro banknotes and coins - as well as to prepare for the establishment of the future European Central Bank (ECB). Unlike many other new institutions, recordkeeping was considered from the organization’s inception. The initial approach adopted was highly centralized and was deemed unsustainable in light of the experience of a fast-growing institution. While unsuccessful initially, the experience provided many insights and avenues of theoretical development when new recordkeeping functions were instituted upon the establishment of the ECB in 1998.

The Legal and Economic Questions posed by the German Constitutional Court’s decision in the Public Sector Purchase Programme (PSPP) Case

This paper seeks to explore the PSPP decision of the German Constitutional Court and its effect on the monetary policy decisions taken by central banks. It begins by exploring the decision and its effect in Germany, together with its wider implications for the European Monetary Union before moving onto consider the standard of review that should be applied by the Courts when they are required to review central banks actions. Conclusions are reached to show that any standard of review should be limited because of the unique economic and political circumstances in which central bank decision making takes place. Keywords: Central Banking; Judicial Review; Proportionality; European Law; European Monetary Union.

Frankel and Rose’s Introduction to the Endogeneity of Optimality: A Model Limited to the European Monetary Experience

This article discusses Frankel and Rose’s (1997, 1998) introduction to endogeneity, which was the result of scrutinizing the optimal currency area (OCA) theory through the evaluative lens of European monetary integration and unification in the 1990s. It cannot be generalized to another monetary union. The development of endogeneity interrelates five different criteria (common currency; transaction costs; commercial integration; economic convergence; and diversification of production) to argue that the introduction of a common currency leads to economic convergence among the participating countries. Frankel and Rose’s choice of analytic criteria arises from empirical studies on European monetary unification, following the OCA framework. The empirical studies found to have influenced the authors can be divided into three themes: the microeconomic benefits of a common currency; the optimality of European countries; and adjustment mechanisms. However, as shown by the selection of certain criteria, the influence of the Emerson report (1990), and the price-stability orientation of fiscal and monetary policies, their proposal only works within the monetary and economic conditions of the future eurozone area.

Trends in the European Monetary Union. An Overview

Four indicators corresponding to the four targets of the European Monetary Union were calculated. The study showed that: (a) concerning the deviation of state’s general government deficit/surplus from 3% of gross domestic product (GDP), all member states had reached their target, with the exception of Cyprus, which was slightly under the target, (b) concerning the deviation of state’s general government debt from 60% of GDP, half of all European Union (EU) member states did not reach their targets, and there was a lot to be done, especially from the EU15 member states, (c) concerning the deviation of state’s inflation rate from the mean of the three states with best results of +1.5%, it was observed that the average value of EU28 member states had reached the final target, mainly due to the performances of the EU15 member states, (d) and concerning the deviation of state’s interest rate from the mean of the three states with the best results of +2%, it was observed that the average value of EU28 member states had reached the final target.

Effects of the European Monetary Union on High-Technology Exports

Our study estimates the effects of the European Monetary Union (EMU) on high-technology (HT) export and assesses the potential knowledge spillovers of such trade. Irrespective of the importance of the HT trade channel, none of the previous studies in the literature focus on the effects of a common currency on HT trade. Increasing trade in the HT sector may lead to more efficient use of resources and help countries to move towards a knowledge-based economy. Moreover, it may lead to higher overall growth. After considering multilateral resistances, pair fixed effects and bias correction in the preferred (three-way bias-corrected) model, EMU membership becomes negative and statistically non-significant for HT exports. Furthermore, our findings indicate that the effect of the EMU on HT exports is country-specific, which lends support to the notion of non-homogenous knowledge transfer and country-related knowledge-based economic development within the EMU.