Original scientific paper
New Member States of the EU and EMU – Convergence and the Financial Crisis
Ines Kersan-Škabić
; Juraj Dobrila University of Pula, Department of Economics and Tourism
Andrea Mihaljević
; Juraj Dobrila University of Pula, Department of Economics and Tourism
Abstract
The theory of the Optimum Currency Area (OCA) clearly accentuates the need for common economic characteristics
among states if it is to work well. This paper analyses the extent to which the New Member States
of the European Union (NMS) satisfy the criteria of nominal and real convergence. Four of these Member
States have introduced the Euro, whereas the rest are at different stages of becoming part of the Economic
and Monetary Union (EMU). A financial crisis of global proportions implies a number of economic
problems in all of the Member States of the EU, especially in the NMS where the new issues have added up
to the already grave consequences of the transition period. What is needed is more unity and co-operation
within the EU as well as significant financial aid from the IMF and the EU to the New Member States in order
to sustain stability in the crisis period. The crisis has again raised the issue of introducing the Euro since
membership of the EMU would buffer the effects of the financial crisis provided that the business cycles of
the Member States were synchronized. Otherwise an independent monetary policy represents a key instrument
in the liquidity regulation of the economy.
Keywords
Foreign direct investments; comparative advantages; RCA; specialization; TO index
Hrčak ID:
57830
URI
Publication date:
5.7.2010.
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