Macroeconomic Policies for EU Accession

Macroeconomic Policies for EU Accession

Edited by Erdem Başçı, Sübidey Togan and Jürgen von Hagen

What macroeconomic requirements must Turkey meet in its quest to accede to the European Union? This book, with its distinguished contributors – well-known economists and policymakers – examines and analyses these macroeconomic challenges confronting Turkey. Although the focus is on the specific situation of Turkey, the lessons are informative for other candidate countries and the findings directly relevant to the process of European integration.

Chapter 5: Monetary Policy Challenges for Turkey in the European Union Accession Process

Fatih Özatay

Subjects: economics and finance, financial economics and regulation

Extract

Fatih Özatay* 5.1 INTRODUCTION After being officially recognized as a candidate state at the Helsinki European Council, the Turkish government announced its own National Programme for the adoption of the acquis communautaire on 19 March 2001. A turning point towards full membership came on 17 December 2004, when a date for starting the membership negotiations was given to Turkey. According to the Treaty Establishing the European Community, the economic and monetary integration process consists of three phases. The first phase covers the period of candidacy for the European Union (EU). In this phase, the candidate countries choose their own monetary policy and exchange rate policy. However, they have to make necessary changes in their legislation to ensure central bank independence. The second is the accession phase and starts with EU membership. This phase consists of two stages: the period before joining the Exchange Rate Mechanism of the European Monetary System (ERM II) and the ERM II period. ERM II membership can take place any time after EU accession. It is an exchange rate arrangement with fixed but adjustable central parities and a fluctuation band of Ϯ15 per cent. The minimum period of ERM II membership is two years prior to the convergence assessment. In the final phase, member countries are expected to join the European Monetary Union (EMU) and adopt the euro.1 In this chapter, the EU accession process is analysed from the perspective of monetary policy. Problems that can be faced by the monetary authorities after becoming a...

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