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Financial and Monetary Integration in the New Europe

Convergence Between the EU and Central and Eastern Europe

Edited by David G. Dickinson and Andrew W. Mullineux

Potential new entrants to the European Union from Central and Eastern European countries face many challenges to achieve financial convergence with the existing EU nations. Using detailed case studies from Bulgaria, the Czech Republic, Latvia, Lithuania and Poland and analysis of cross country data from these regions, Financial and Monetary Integration in the New Europe looks at the key issues for applicant countries as they negotiate the terms of their membership in the European Union. Of major concern to these countries is the financial sector and its implications for economic growth and the conduct of macroeconomic policy. The book examines, in particular, monetary and exchange rate policies, banking regulation and financial market efficiency. The overall impact of building a market driven financial system on economic development is also explored.
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Chapter 7: Monetary policy prospects and Maastricht criteria in Lithuania before accession to the EU

Convergence Between the EU and Central and Eastern Europe

Salomeja Jasinskaite, Dalia Vidickiene and Rasa Melnikiene


Salomeùja Jasinskaiteù, Dalia Vidickieneù and Rasa Melnikieneù INTRODUCTION Lithuania, like most of other Central and Eastern European (CEE) countries, is striving for membership in the European Union (EU) and regards this aspiration as its most important economic and political goal. In 1993, the European Council in Copenhagen set certain economic requirements for countries seeking EU membership. Alongside such conditions as a functioning market economy and the ability to cope with competitive pressure within the EU, CEE countries must be capable of taking on obligations of membership, including participation in the European Economic and Monetary Union (EMU). Therefore, the applicant countries are challenged by new tasks in the sphere of monetary and exchange rate policy. This is especially characteristic of the countries that have introduced a currency board arrangement (CBA), whose operating mechanism differs in principle from the monetary policy pursued by EU countries. Many economists acknowledge that the operation of a CBA made an impact on financial stabilization in both Lithuania and Estonia. However, apart from the fact that the CBA is entirely inconsistent with standards of EU central banking (Krzak 1997), this regime is a factor that restricts the pursuit of an active monetary policy. Therefore, taking into account LithuaniaÕs declared wish to join the EU and participate in EMU, the principles of the monetary policy model in Lithuania must be evaluated and self-determination concerning the further functioning of the CBA and the exchange rate regime must be embraced. REASONS AND CONDITIONS FOR ABANDONING THE CBA Currently,...

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