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Title: On the road to Euro: how synchronized is Estonia with the Euro zone?
Authors: Brixiova, Zuzana
Morgan, Margaret H.
Wörgötter, Andreas
Issue Date: 2010
Publisher: European Association for Comparative Economic Studies (EACES)
Università Carlo Cattaneo - LIUC
Bibliographic citation: Brixiova Zuzana, Morgan Margaret H., Wörgötter Andreas (2010), On the road to Euro: how synchronized is Estonia with the Euro zone?. In: The European Journal of Comparative Economics, vol. 7, n. 1, 2010, p. 203-227. E-ISSN 1824-2979.
Abstract: While the currency board served Estonia well during transition in the 1990s, it has limited its ability to counter the impact of the global financial crisis and heightened the currency risks. The euro adoption has thus become a top policy priority again. However, this paper finds that even after almost two decades of hard peg with the core of the euro zone shocks affecting Estonia are relatively weakly synchronized with those of the zone, contributing to large output volatility. Nevertheless, the case for euro adoption by Estonia holds, since the costs of the loss of independent monetary policy were paid, and - as the global financial crisis demonstrated - the currency board is no substitute for the common currency. To reduce future output volatility, Estonia should move to counter-cyclical fiscal policies, maintain labor and product market flexibility, and adopt policies stimulating rise in the knowledge and high-tech content of its production.
Journal/Book: The European journal of comparative economics
Appears in Collections:EJCE

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