Challenges and Prospects
Edited by Klaus Liebscher, Josef Christl, Peter Mooslechner and Doris Ritzberger-Grünwald
Chapter 5: The euro in Central and Eastern European countries: some introductory remarks
Josef Christl The Eurosystem has, without doubt, established a truly credible and attractive European currency within a short period of time, and the euro has since come to play a signiﬁcant role also outside the euro area – including the Central and Eastern European region. Before the cash changeover of national currencies to the euro there was an intense debate about whether the euro would be able to take over the role of the Deutsche mark in Central and Eastern Europe, and whether the euro would be able to attain the kind of reputation that the Deutsche mark – and the Austrian schilling – enjoyed. Today, substantial amounts of currencies are circulating outside the countries in which they were originally issued. In most cases, however, little is known about their exact whereabouts, the extent of currency substitution and the motives behind the decision to hold foreign money rather than one’s domestic currency. Yet it is important, for various reasons, to learn more about the extent a currency is used abroad. Among other things, large amounts of circulating foreign currency can add uncertainty to the results of monetary policy. Increases or decreases of domestic money demand might be wrongly appraised if foreign currency demand is incorrectly estimated. Furthermore, knowledge of the volume of currency circulating abroad can be revealing for domestic and foreign ﬁscal policy. In both cases, the size of unoﬃcial dollarization or euroization might be related to the size of the foreign currency black market, reﬂecting a certain degree...
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