Essays in empirical macroeconomics

Abstract

On the Ist of January 1999 eleven European Union (EU) members fixed their currencies to form the Economic and Monetary Union (EMU). In the run-up to the formation of the euro area candidate countries had to fulfil a set of entry criteria laid down in the Treaty of Maastricht. These consisted of limitations on nominal exchange rate volatility, and on the levels of inflation, interest rate, public debt and fiscal deficit. After the successful formation of the common currency, the countries gave up individual monetary policy to the European Central Bank (ECB), which supposedly, at least for some, meant a gain in credibility and a substantial change in monetary policy in general. Finally, following the latest wave of EU enlargement, which took place on the 1st of May 2004, in the next years we can expect new members to be aiming to join the euro. The five nominal criteria will most certainly be applied to future enlargements. Whilst before EU entry practically all candidate countries declared a willingness to join the euro ”as soon as possible” the question whether they are ready and suitable to do so, is important.