Focus on European Economic Integration Q2-04

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• Focus on European Economic Integration 2/04 (PDF, 1.6 MB) June 2004.

Studies and Analyses

• Developments in Selected Countries (PDF, 284 kB) Barisitz, Fidrmuc, Hildebrandt, Kirova, Magel, Reininger, Walko – Focus on European Economic Integration 2/04 en Jun 30, 2004, 12:00:00 AM

• Central Bank Independence in Southeastern Europe with a View to Future EU Accession (PDF, 217 kB) Dvorsky. Dvorsky - Focus on European Economic Integration 2/04 The paper provides a qualitative overview on current central bank legislation in Southeastern Europe (SEE), namely Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Romania, and Serbia and Montenegro, and assesses the degree of central bank independence (CBI) already achieved, using the Maastricht Treaty requirements as a yardstick. The following aspects of legal CBI are examined: first, the definition of statutory objectives in central bank laws (functional independence); second, the central banks independence in the formulation and implementation of monetary policy (institutional independence); third, the legal status of the central bank governor and other members of the highest decision-making body (personal independence). Fourth, the paper examines two aspects of financial independence, namely the budgetary independence of the central bank itself and the prohibition of monetary financing. Fifth, the paper briefly deals with central bank accountability issues. Moreover, selected aspects of actual CBI are analyzed. The paper concludes that the central bank laws already comply with Treaty requirements in some areas, while a considerable number of weaknesses remain. With a view to future EU accession, a further strengthening of both legal and actual CBI will be necessary for the countries to fulfill the requirements of the Maastricht Treaty. en Jun 30, 2004, 12:00:00 AM

• A Meta-Analysis of Business Cycle Correlations between the Euro Area, CEECs and SEECs – What Do We Know? (PDF, 223 kB) Fidrmuc, Korhonen. Fidrmuc, Korhonen - Focus on European Economic Integration 2/04 We review the literature on business cycle correlation between the euro area, eight new EU Member States (the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia), and two Southeastern European candidate countries (Bulgaria and Romania) which are expected to join the EU in 2007. Our meta-analysis suggests that several new Member States have already achieved a comparably high degree of synchronization with the euro area business cycle. We also find that estimation methodologies can have a significant effect on correlation coefficients. Finally, we show that Bulgaria and Romania also display a lower but still positive correlation of business cycles with Europe, although these countries have been increasingly disregarded in most recent publications. en Jun 30, 2004, 12:00:00 AM

• Exchange Rate Arrangements and Monetary Policy in Southeastern Europe and Turkey: Some Stylized Facts (PDF, 212 kB) Barisitz. Focus on European Economic Integration 2/04 This paper offers an analytical overview of exchange rate regimes and monetary policy frameworks in the countries of Southeastern Europe and Turkey. The following ten countries/nonsovereign territories are analyzed here: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, the Former Yugoslav Republic of Macedonia (FYROM), Montenegro, Romania, Serbia and Turkey. Hard pegs and nominal exchange rate anchors feature in four cases, managed floats and money growth targeting in three cases, unilaterally euroized regimes in two cases, and a managed float and real exchange rate anchor in one case. The paper deals with the institutional importance as well as the unofficial role of the euro in Southeastern Europe. Furthermore, individual countries/territories economic developments in recent years (2001—04) and current monetary and exchange rate policies, instruments, issues and outcomes are explored in more detail. Inflation is found to have been on a declining and monetization on a rising trend across the region. In a number of cases, inflation performance can be explained by the stabilizing influence of the exchange rate as an external anchor. But some countries with money growth targeting strategies and loosely managed floats have also boasted low price rises. Overall monetary and economic policy credibility and perseverance may be the key to success here. The paper concludes with a brief outlook focusing on the euro as a stable anchor and point of convergence. en Jun 30, 2004, 12:00:00 AM

• Exchange Rate Developments and Fundamentals in Four EU Accession and Candidate Countries: Bulgaria, Croatia, Romania and Turkey (PDF, 224 kB) Cuaresma, Fidrmuc, Silgoner. Crespo-Cuaresma, Fidrmuc, Silgoner - Focus on European Economic Integration 2/04 This paper deals with exchange rate challenges in the four potential EU Member States Bulgaria, Croatia, Romania and Turkey. For the two countries with freely floating currencies, Romania and Turkey, we evaluate possible exchange rate misalignments based on a monetary model of exchange rate determination. In the case of Bulgaria and Croatia, two countries with currency board and narrow-band peg arrangements against the euro, we discuss possible exit strategies. We argue that a continuation of their current exchange rate regimes is likely to represent an optimal strategy for these countries in the run-up to both EU membership and the eventual adoption of the euro. en Jun 30, 2004, 12:00:00 AM

• Equilibrium Exchange Rates in Southeastern Europe, Russia, Ukraine and Turkey: Healthy or (Dutch) Diseased? (PDF, 403 kB) Égert. Égert - Focus on European Economic Integration 2/04 This paper investigates the equilibrium exchange rates of three Southeastern European countries, namely Bulgaria, Croatia and Romania, of two CIS economies, namely Russia and Ukraine, and of Turkey. A systematic approach in terms of different time horizons at which the equilibrium exchange rate is assessed is conducted, combined with a careful analysis of country-specific factors. The deviation from absolute purchasing power parity (PPP) and from the real exchange rate, which is given by relative productivity levels, is investigated. For Russia, a first look is taken at the Dutch disease phenomenon as a possible driving force behind equilibrium exchange rates. As a next step, a Behavioral Equilibrium Exchange Rate (BEER) model including productivity and net foreign assets is estimated using both time series and panel techniques. Control variables such as openness, public debt and public expenditures are also used to check for the robustness of the results. In a final stage, total real misalignment bands are computed for the countries under study. en Jun 30, 2004, 12:00:00 AM

• South Eastern EUROPEAN Challenges and Prospects - The OeNB's Conference on European Economic Integration 2004 (PDF, 121 kB) Barisitz - Focus on European Economic Integration 2/04 en Jun 30, 2004, 12:00:00 AM

• The CEEC Website (PDF, 461 kB) Focus on European Economic Integration 2/04 en Jun 30, 2004, 12:00:00 AM

• Selected Abstracts (PDF, 70 kB) Walko, Reininger - Focus on European Economic Integration 2/04 en Jun 30, 2004, 12:00:00 AM

• The “East Jour Fixe” of the Oesterreichische Nationalbank (PDF, 71 kB) Fidrmuc - Focus on European Economic Integration 2/04 en Jun 30, 2004, 12:00:00 AM

• Statistical Annex (PDF, 94 kB) Focus on European Economic Integration 04/2 en Jun 30, 2004, 12:00:00 AM