The Third Round of the Euro Area Enlargement: Are the Candidates Ready?

Milan Deskar-Škrbić, Karlo Kotarac () and Davor Kunovac ()
Additional contact information
Karlo Kotarac: The Croatian National Bank, Croatia
Davor Kunovac: The Croatian National Bank, Croatia

No 57, Working Papers from The Croatian National Bank, Croatia

Abstract: In this paper, we study the readiness of Bulgaria, Croatia and Romania to adopt the common monetary policy of the ECB in the context of the third round of euro area enlargement. Following the later stages of the optimal currency area (OCA) theory we focus on the coherence of economic shocks between candidate countries and the euro area and analyse the relevance of euro area shocks for key macroeconomic variables in these countries. Our results, based on a novel empirical approach, show that the overall importance of those shocks that are relevant for the ECB is fairly similar in candidate countries and the euro area. The cost of joining the euro area should, therefore, not be pronounced, at least from the aspect of the adoption of the common counter-cyclical monetary policy. This conclusion holds for all three candidates, despite important differences in monetary and exchange rate regimes.

Keywords: euro area enlargement; economic shocks; BVAR; common monetary policy; Mundellian trilemma (search for similar items in EconPapers)
JEL-codes: E32 E52 F45 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2019-07
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.hnb.hr/repec/hnb/wpaper/pdf/w-057.pdf (application/pdf)

Related works:
Journal Article: The third round of euro area enlargement: Are the candidates ready? (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hnb:wpaper:57

Access Statistics for this paper

More papers in Working Papers from The Croatian National Bank, Croatia
Bibliographic data for series maintained by Romana Sinković ().