EMBA CEP_Part4 - Comparative Economic Policy Part 4 Euro...

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MBA Programs MBA Programs © Comparative Economic Policy Part 4: Euro and Part 5: Convergence Bod, Péter Ákos, Phd EMBA, Fall 2013 Lecturer's NamePéter Ákos BOD
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MBA Program MBA Programs 2 How to choose exchange rate regimes Many things influence the choice: Main goal of the central bank: inflation targeting or exhange rate targeting (fixing) Financial vulnerability Discipline and credibility of economic policy: a good peg can lend credibility to a smaller country Openness to trade: too much of floating hinders foreign trade Conclusion: „One regime doesn’t fit all sizes.”
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MBA Program MBA Programs 3 The adoption of the Euro Advantages Decreasing transaction costs Lower interest rates Larger monetary stability Increased credibility Costs Technical costs (menu costs) One-off rise in price level Customers’ learning difficulties Costs of convergence Loss of independent monetary policy
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MBA Program MBA Programs 4
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