Abstract
Is a monetary union advantageous? This analysis proposes an approach to the issue from the vantage point of a small open economy, namely the Czech Republic. Is it sensible for the Czech economy to participate in a monetary union like the EMU? What criteria can we apply to find out? To assess the advantages of joining a monetary union, it is recommended to analyse, instead of the Maastricht criteria, five new criteria that reflect the change in the competitiveness of a country. (1) How do import prices respond to a weaker exchange rate? (2) How do export prices respond to a weaker exchange rate? (3) How does domestic inflation respond to a weaker exchange rate? (4) How do wage costs in firms respond to a weaker exchange rate? (5) How do GDP and employment respond to a weaker exchange rate? Only when a weakening or devaluation of the currency is not beneficial to competitiveness, only then should a country with small open economy consider an entry into a monetary union (like the EMU).
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For details, see www.cnb.cz/docs/ARADY/MET_LIST/rekulc_en.pdf.
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Acknowledgments
My thanks for the brainstorming and ideas go to Martin Mandel from the University of Economics in Prague and members of the National Economic Council of the Czech Republic Michal Mejstřík and Miroslav Zámečník. The responsibility for the philosophy, argumentation and the conclusions rests with the author.
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Michl, A. (2017). The Euro Marriage. In: Procházka, D. (eds) New Trends in Finance and Accounting . Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-49559-0_1
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