Economic Review, Vol. 57 No. 7-8, 2006.
Conference paper
EU ACCESSION IMPLICATIONS ON BOSNIA AND HERZEGOVINA ON THE BASIS OF OPTIMAL CURRENCY AREA THEORY ANALYSIS
Dženan Đonlagić
Abstract
The paper tests accession implications for Bosnia and Herzegovina on the basis of optimal currency area (OCA) theory analysis. Using the method of comparative analysis, we concluded that the possibility of economic schock on the demand side will be less probable when Bosnia and Herzegovina joins the European Monetary Union (EMU). By integration of Bosnia and Herzegovina into the EMU, instead of asymetric schocks, the tendency of symetric ones might appear. Trade integration may lead towards regional concentration of industrial activities. In that case, economic schocks specifi c for certain sectors may become economic schocks for the country as a whole. In this case, the exchan-ge rate as the instrument of macroeconomic policy could be used. As the result of Bosnia and Herzegovina’s integration into the EMU, we would have less negative schocks. The most rational solution for Bosnia and Herzegovina is gradual monetary integration. By having stable monetary policy, we need to strengthen the managament of foreign trade policy, income policy, management of public fi nance, industrial policy, etc.
Keywords
optimal currency area; integration; European monetary union; economic schock
Hrčak ID:
8458
URI
Publication date:
29.8.2006.
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