THE ENDOGENEITY OF THE OCA CRITERIA: EVIDENCE FROM SIX NEW EU MEMBER STATES
Dimitrios Sideris
Bank of Greece and Panteion University
ABSTRACT
The present paper has two aims. The first aim is to test whether six new member states of the European Union (the six Central and Eastern European Countries) form an optimum currency area (OCA) with the eurozone, in an attempt to assess their readiness for euro adoption. The second aim is to examine whether the introduction of the euro in 1999 and the decision of the countries to seek to join the euro area created any forces fostering their convergence, evidence which would be in line with the theory on the endogeneity of the OCA criteria. Our findings indicate that the introduction of the euro did promote integration of the six new member states and that, at present, they are quite well aligned with the eurozone.
Keywords: EU enlargement; OCA; real exchange rates; cointegration; GPPP.
JEL classification: C32; F33; F36; F42.
Acknowledgements: Comments from Heather Gibson are gratefully acknowledged. All remaining errors are entirely my responsibility. The views expressed in this paper are the author’s own and do not necessarily represent those of the institutions to which he is affiliated.
Correspondence:
Dimitrios Sideris
Economic Research Department
Βank of Greece, 21, El. Venizelou Ave.,
10250 Athens, Greece,
Tel. +30210-3203607,
Fax +30210-3233302
e-mail: dsiderhs@bankofgreece.gr