A Common Currency for Belarus and Russia?

33 Pages Posted: 9 Feb 2006

See all articles by Anne-Marie Gulde

Anne-Marie Gulde

International Monetary Fund (IMF)

Etibar Jafarov

International Monetary Fund - European Department

Vassili Prokopenko

International Monetary Fund (IMF) - Monetary and Financial Systems Department

Date Written: December 2004

Abstract

This paper discusses costs, benefits, and implementation challenges of a possible currency union between Belarus and Russia. It shows that Belarus and Russia are economically closely linked but nevertheless do not fulfill all "optimal currency area" criteria, especially the macroeconomic symmetry condition. Furthermore, we argue that the different speeds of economic liberalization over the past decade have resulted in different economic structures, with Belarus still dependent on monetary financing of budgets and industries. However, a final cost-benefit analysis also needs to consider that currency unification may bring substantial benefits from reduced transaction costs, an improved macroeconomic environment in Belarus, and by acting as a catalyst to advance structural reforms in Belarus.

Keywords: currency union, monetary union, Belarus, Russia

JEL Classification: E42, F31, F33

Suggested Citation

Gulde, Anne-Marie and Jafarov, Etibar and Prokopenko, Vassili, A Common Currency for Belarus and Russia? (December 2004). IMF Working Paper No. 04/228, Available at SSRN: https://ssrn.com/abstract=879053

Anne-Marie Gulde (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Etibar Jafarov

International Monetary Fund - European Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Vassili Prokopenko

International Monetary Fund (IMF) - Monetary and Financial Systems Department ( email )

Washington, DC
United States

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