Nominal and Real Convergence and the Zloty Participation in ERM II
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Publication date: 2004-10-25
GNPJE 2004;195(10):23-42
A comparison of advantages and costs of joining the euro area reveals some asymmetry. Advantages will accumulate over a long period, while the risk of incurring costs will be the highest in the early period, when the Polish economy is to be susceptible to asymmetrical shocks. This is why optimisation of advantages and minimisation of costs of entry into the EMU require a high degree of real convergence. At the same time, real convergence progress will to a major extent determine the fulfilment of nominal criteria. Hence, introduction of the zloty into ERM II should occur when it becomes clear that fulfilment of the fiscal and monetary criteria laid down in the Treaty of Maastricht will not be threatened at the time of presence in the exchange rate mechanism. If any criterion is not fulfilled, the period of remaining in ERM II may be extended which seems to be dangerous due to the risk of a speculative attack. The main thesis of the article may be contained in the statement that reaching a high degree of real convergence is the condition of obtaining the most favourable net effect of currency integration with the euro area. Its sufficiently high level will perform three basic functions: i.e. optimisation of entry into the euro area, minimisation of risks and support for the process of nominal convergence.
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