Euro zone Debt Crisis, Exchange Rate Policies and Accession to the European Monetary Union
After decades of discussions we are still far away from general rule(s) in determining the characteristics of “optimal” exchange rate policy. Furthermore, there are still doubts and different approaches even in some basic questions, such is the classification system of exchange rate arrangements. Still, apart from the persistent dilemmas, exchange rate remains one of the most important indicators both in terms of national and global economy.
The Eurozone debt crisis makes the question of “appropriate” exchange rate policy even more intriguing, consequently introducing analyses of a common currency versus keeping monetary sovereignty. The practical choice of a regime is a complex question for European countries, especially in the case of Central and Eastern, former centrally planning/transition economies. Membership in a monetary union was one of the final goals of the transition (and a final proof of its success) but the crisis in the euro zone questioned the criterions and priorities. The exogenous, asymmetric shock that has shown the shortcomings of the Eurozone, resulted in discussions on new institutional framework, including those on banking and political union, and rethinking the role of existing institution. As a result of the debt crisis, problems within a group of old Eurozone members (in literature usually entitled as PIIGS countries1) escalated, resulting in high unemployment, decreasing rates of GDP and pro-recession trends. The crisis management in terms of monetary policy was limited by the monetary union membership while the funds provided from the Union were conditioned with strict austerity measures....
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