Assessing the optimality of euro adoption in Romania through shock correlations

The present paper is concerned with the prospect of euro adoption in Romania. The study starts from the relevant literature of the Optimum Currency Areas and identifies the most widely acknowledged meta property and methodological model for this purpose: the SVAR Blanchard and Quah decomposition fo...

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Autor principal:	Adrian Bodea
Formato:	article
Lenguaje:	EN
Publicado:	University of A Coruna 2021
Materias:	optimum currency areas SVAR Blanchard and Quah decomposition Romania euro adoption shock correlation Political science J Political institutions and public administration (General) JF20-2112
Acceso en línea:	https://doaj.org/article/69a5ac231b2048268528c3201f839e5a
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spelling	oai:doaj.org-article:69a5ac231b2048268528c3201f839e5a2021-12-02T09:12:59ZAssessing the optimality of euro adoption in Romania through shock correlations10.17979/ejge.2021.10.2.79072254-7088https://doaj.org/article/69a5ac231b2048268528c3201f839e5a2021-12-01T00:00:00Zhttps://revistas.udc.es/index.php/ejge/article/view/7907https://doaj.org/toc/2254-7088 The present paper is concerned with the prospect of euro adoption in Romania. The study starts from the relevant literature of the Optimum Currency Areas and identifies the most widely acknowledged meta property and methodological model for this purpose: the SVAR Blanchard and Quah decomposition for identifying the supply and demand shocks. Employing the indicated model and the most recent data, we are able extract and analyse the underlying shocks that hit 34 European economic entities in the period 1995-2019, while also taking into account two crucial structural changes for the Romanian economy – central bank independence and EU accession. After performing the pairwise correlations between Romania and the rest of the economic entities for both the supply and demand disturbances, we map them on a bidimensional graph. We discover that while there is relevant integration and connectedness that ensures relatively high correlations between supply shocks, the politically-motivated monetary and fiscal policy disturbances that created ample and hectic demand side movements, are a factor of great concern for the prospect of single currency adoption in this Eastern European country. The findings support the view that there is room for the conduct of macro policies to become more supportive to the process of euro adoption and that the respect of convergence criteria would help in this respect. To our knowledge, this is the first study performing pairwise shock correlations between Romania and many other European economic entities, while also isolating the effect of post 2005 structural changes. Adrian BodeaUniversity of A Corunaarticleoptimum currency areasSVARBlanchard and Quah decompositionRomaniaeuro adoptionshock correlationPolitical scienceJPolitical institutions and public administration (General)JF20-2112ENEuropean Journal of Government and Economics, Vol 10, Iss 2 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	optimum currency areas SVAR Blanchard and Quah decomposition Romania euro adoption shock correlation Political science J Political institutions and public administration (General) JF20-2112
spellingShingle	optimum currency areas SVAR Blanchard and Quah decomposition Romania euro adoption shock correlation Political science J Political institutions and public administration (General) JF20-2112 Adrian Bodea Assessing the optimality of euro adoption in Romania through shock correlations
description	The present paper is concerned with the prospect of euro adoption in Romania. The study starts from the relevant literature of the Optimum Currency Areas and identifies the most widely acknowledged meta property and methodological model for this purpose: the SVAR Blanchard and Quah decomposition for identifying the supply and demand shocks. Employing the indicated model and the most recent data, we are able extract and analyse the underlying shocks that hit 34 European economic entities in the period 1995-2019, while also taking into account two crucial structural changes for the Romanian economy – central bank independence and EU accession. After performing the pairwise correlations between Romania and the rest of the economic entities for both the supply and demand disturbances, we map them on a bidimensional graph. We discover that while there is relevant integration and connectedness that ensures relatively high correlations between supply shocks, the politically-motivated monetary and fiscal policy disturbances that created ample and hectic demand side movements, are a factor of great concern for the prospect of single currency adoption in this Eastern European country. The findings support the view that there is room for the conduct of macro policies to become more supportive to the process of euro adoption and that the respect of convergence criteria would help in this respect. To our knowledge, this is the first study performing pairwise shock correlations between Romania and many other European economic entities, while also isolating the effect of post 2005 structural changes.
format	article
author	Adrian Bodea
author_facet	Adrian Bodea
author_sort	Adrian Bodea
title	Assessing the optimality of euro adoption in Romania through shock correlations
title_short	Assessing the optimality of euro adoption in Romania through shock correlations
title_full	Assessing the optimality of euro adoption in Romania through shock correlations
title_fullStr	Assessing the optimality of euro adoption in Romania through shock correlations
title_full_unstemmed	Assessing the optimality of euro adoption in Romania through shock correlations
title_sort	assessing the optimality of euro adoption in romania through shock correlations
publisher	University of A Coruna
publishDate	2021
url	https://doaj.org/article/69a5ac231b2048268528c3201f839e5a
work_keys_str_mv	AT adrianbodea assessingtheoptimalityofeuroadoptioninromaniathroughshockcorrelations
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Assessing the optimality of euro adoption in Romania through shock correlations

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