International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

European Union Expansion and the Euro: Croatia, Iceland and Turkey
Cynthia Royal Tori,Scott Leander Tori

This paper uses real exchange rate variability and the adjustment time for real exchange rate changes to assess the viability of adopting the euro for the nine European countries. The results suggest that Croatia and Lithuania are the only European Union countries that have convergence and minimal real exchange rate volatility when shocks occur. The persistence of real exchange rate changes and slow adjustment times suggest that the viability of euro zone membership for Bulgaria, the Czech Republic, Hungary, Poland, and Iceland requires greater integration. The results also indicate that the costs associated with adopting a common currency are high for Romania and Turkey.

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