The Admission of Accession Countries to an Enlarged Monetary Union: A Tentative Assessment

49 Pages Posted: 31 May 2003

See all articles by Michele Ca' Zorzi

Michele Ca' Zorzi

European Central Bank (ECB)

Roberto A. De Santis

European Central Bank (ECB) - Directorate General Economics

Date Written: February 2003

Abstract

The enlargement of the European monetary union to include the accession countries (ACs) will not lead to higher average inflation in the enlarged euro area, but only to inflation redistribution across countries if continuity of the monetary policy framework is preserved. In the short term, unanticipated shocks to the real exchange rate may instead affect aggregate inflation if member countries' economic structure differs. The theoretical model is then applied to ten ACs. The numerical results indicate that the implications for the euro area are significant only if we assume a strong real exchange rate appreciation and if ACs are weighted in terms of purchasing power parity standards. In the event of real exchange rate or country-specific supply shocks in ACs, the consequences would be limited for both the current and the enlarged euro area, but sizeable for ACs themselves.

Keywords: Accession Countries, Balassa-Samuelson Effect, European Monetary Union, Exchange Rate Regimes, Monetary Policy

JEL Classification: E52, E58, F33, F40

Suggested Citation

Ca' Zorzi, Michele and De Santis, Roberto A., The Admission of Accession Countries to an Enlarged Monetary Union: A Tentative Assessment (February 2003). ECB Working Paper No. 216. Available at SSRN: https://ssrn.com/abstract=388280

Michele Ca' Zorzi

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Roberto A. De Santis (Contact Author)

European Central Bank (ECB) - Directorate General Economics ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
116
Abstract Views
909
rank
248,247
PlumX Metrics