Abstract
Is a monetary union advantageous? This analysis proposes an approach to the issue from the vantage point of a small open economy, namely the Czech Republic. Is it sensible for the Czech economy to participate in a monetary union like the EMU? What criteria can we apply to find out? To assess the advantages of joining a monetary union, it is recommended to analyse, instead of the Maastricht criteria, five new criteria that reflect the change in the competitiveness of a country. (1) How do import prices respond to a weaker exchange rate? (2) How do export prices respond to a weaker exchange rate? (3) How does domestic inflation respond to a weaker exchange rate? (4) How do wage costs in firms respond to a weaker exchange rate? (5) How do GDP and employment respond to a weaker exchange rate? Only when a weakening or devaluation of the currency is not beneficial to competitiveness, only then should a country with small open economy consider an entry into a monetary union (like the EMU).
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
For details, see www.cnb.cz/docs/ARADY/MET_LIST/rekulc_en.pdf.
References
Balassa B (1965) Trade liberalization and revealed comparative advantage. Manchester Sch Econ Soc Stud 33(2):99–123
Boughton JM (2001) Silent revolution: the international monetary fund, 1979–1989. Stationary Office Books
Bruha J, Podpiera J, Polak S (2010) The convergence dynamics of a transition economy: the case of Czech Republic. Econ Model 27(1):116–124
Capek A (1998) Realny efektivni smenny kurz: Problemy konstrukce. Politicka ekonomie 46(5):611–631
Cihak M, Holub T (2005) Price convergence in EU accession countries: evidence from the international comparison. Economie Internationale 2(102):59–82
Frait J, Komarek L (1999) Dlouhodoby rovnovazny realny menovy kurz koruny a jeho determinanty. Working Paper No. 9, Czech National Bank
Frankel J (2004) On the Renminbi: the choice between adjustment under a fixed exchange rate and adjustment under a flexible rate. High-level seminar on foreign exchange system, Dalton, China, pp 1–26
Havlik P (2010) Unit labour costs, exchange rates and responses to the crisis in CESEE, WIIW Research Report
Klaus V (2006) Patnact let od zahajeni ekonomicke transformace. Cep. 47:2006
Kornai J (1992) Socialist economy. Princeton University Press, USA
Krugman P (1991) Increasing returns and economic geography. J Polit Econ 99(3):483–499
Lafay G (1992) The measurement of revealed comparative advantages. In: Dagenais MG, Muet P-A (eds) International trade modeling, London
Lerner AP (1944) The economics of control: principles of welfare economics. Macmillan, New York
Machlup F (1955) Relative prices and aggregate spending in the analysis of devaluation. Am Econ Rev 45(3):255–278
Mandel M, Tomsik V (2003) Monetarni ekonomie v male otevrene ekonomice, Management Press
Marshall A (1923) Money, credit & commerce. Macmillan, London, GB
Mejstrik M (1989) Innovation as a quality change: effects of export and export subsidy. Paper presented at 4th annual congress of EEA in Augsburg, 2–4 Sept 1989
NERV (2011) Souhrnna zprava podskupin Narodni ekonomicke rady vlady pro, Prague
Polak JJ, Chang TC (1950) Effect of Exchange Depreciation on a Country’s Export Price Level. Int Monetary Fund Staff Pap 1:49–70. http://dx.doi.org/10.2307/3866178
Robinson J (1947) Beggar-My-Neighbour Remediem for unemployment. Essays on the theory of employment. Blackwell, Oxford
Roubini N (2010) Crisis economics: a crash course in the future of finance. Penguin Press HC
Zamecnik M (2010) Kdyz mzdy ujizdeji produktivite, Euro, 13/12
Acknowledgments
My thanks for the brainstorming and ideas go to Martin Mandel from the University of Economics in Prague and members of the National Economic Council of the Czech Republic Michal Mejstřík and Miroslav Zámečník. The responsibility for the philosophy, argumentation and the conclusions rests with the author.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2017 Springer International Publishing AG
About this paper
Cite this paper
Michl, A. (2017). The Euro Marriage. In: Procházka, D. (eds) New Trends in Finance and Accounting . Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-49559-0_1
Download citation
DOI: https://doi.org/10.1007/978-3-319-49559-0_1
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-49558-3
Online ISBN: 978-3-319-49559-0
eBook Packages: Business and ManagementBusiness and Management (R0)