The Risk of Loosing Control over Real Interest Rates under the Currency Zone

• Authors: Slawinski A.
• Languages of publication: PL

Abstracts

EN

The article analyses how the functioning of the currency board system affects the prospects of joining the euro zone by the Baltic countries. Not long ago, it was expected that for the Baltic states the currency board system would be a convenient shortcut to the euro zone. Two years ago, such a scenario was perceived as almost certain. At present accession of the Baltic states to the euro zone seems very remote and uncertain. The main reason for this dramatic change was the materialisation of risks, which are inherent to the currency board system. Above all, the system is pro-cyclical. The illustration is the worrisome feedback, between the credit boom and the decrease in real interest rates. The latter were pushed by the inflation into the negative level. The recent problem of the Baltic countries is not when to join the euro zone but how to avoid a financial crisis, which might be triggered by the credit boom and rapidly growing foreign indebtedness.

Keywords

EN

BALTIC STATES' FINANCES; CREDIT BOOM; CURRENCY BOARD SYSTEM; REAL INTEREST RATES

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Komitet Nauk Ekonomicznych PAN, Polskie Towarzystwo Ekonomiczne
• Journal: Ekonomista
• Year: 2007
• Issue: 2
• Pages: 147-159
• Document type: ARTICLE

Contributors

author

Slawinski A.

• A. Slawinski, Szkola Glówna Handlowa w Warszawie, al. Niepodleglosci 162, 02-554 Warszawa, Poland

Identifiers

CEJSH db identifier

07PLAAAA02755625