Currency Board Arrangement to Euro as a Stage for Prospective EU Members to Join the Euro's Zone

Abstract

The main objective of this paper is to create an option for the present East European monetary and exchange rate policy that should result in the soonest possible access to Stage 3 of Economic and Monetary Union. This paper proposes to introduce currency board arrangement tied with Euro as an accession-related adjustment to ERM II and to the euro's area. To prove necessity of such solution this paper develops the potential dangers of imminent joining ERM II by the post-communist potential members of the EU and potential benefits of supporting CBA tied with Euro and adopting it before joining ERM II by these countries. As a main benefit may be indicated the prospective euroization of their economies and closer links to euro interest rates proven by CBA tied to other currencies in the past. But this requires support from the European Central Bank and the European Council for such an alternative.

Keywords: Transition Finance, Currency Board, Central Bank, Comparative Monetary Policies, Financial Integration, International Monetary Arrangements

JEL Classification: F36, F33, E58, E63, P34