Currency Substitution in Anticipation of EU Accession

Hans Genberg

in Monetary Unions and Hard Pegs

Published in print March 2004 | ISBN: 9780199271405
Published online August 2004 | e-ISBN: 9780191601200 | DOI:
 Currency Substitution in Anticipation of EU Accession

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Countries in Eastern and Central Europe that are joining the European Union will eventually also join EMU. The process of accession entails a transition period at whose end the domestic currency is certain to be replaced by the euro. This chapter argues that this programmed demise of the domestic currency may bring about significant spontaneous euroization already during the transition period. If the euro is adopted by the private sector in anticipation of the official changeover, the country incurs a resource cost in the form of lost seignorage.

Keywords: accession countries; currency regime change; European Monetary Union; European Union; forward-looking expectations; seignorage sharing; unilateral euroization

Chapter.  4526 words. 

Subjects: Economic Systems

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