Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/52066 
Year of Publication: 
2011
Series/Report no.: 
IZA Discussion Papers No. 5797
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
Starting July the 1st 1997, Bulgaria adopted a Currency Board (CB) monetary system. This paper aims at investigating if the adoption of the CB monetary system, which involves the cost of loosing monetary autonomy, has provided a relatively better (with respect to other CEEC) monetary integration of Bulgaria with the European Monetary Union (EMU). Since Bulgarian monetary variables are endogenous under a CB, we focus on the ECB and FED interest rates as the main sources on monetary volatility. First, we find that ECB shocks are more rapidly absorbed and have less significant impact of domestic variables, with respect to other external monetary shocks (FED rate changes). Second, the responses of Bulgarian variables following changes in the ECB interest rate present lower persistence and significance, with respect to what the previous literature emphasized for other CEEC with monetary autonomy. This latter result still holds when accounting for different sources of cross-country heterogeneity outlined in the literature, thus supporting that the adoption of the CB may have worked as a rather good device in terms of integration of Bulgaria into the EMU.
Subjects: 
currency board
Bulgaria
monetary shocks
ECB interest rate
FED interest rate
JEL: 
E42
E52
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
277.26 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.