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THE CHOICE OF THE EXCHANGE RATE REGIMES OF THE EUROPEAN UNION ACCESSION COUNTRIES INFLUENCED BY THE WORLD CURRENCY CONSOLIDATION

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Author(s): Marin Frâncu

Journal: Romanian Journal of European Affairs (RJEA)
ISSN 1582-8271

Volume: 4;
Issue: 1;
Start page: 29;
Date: 2004;
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Keywords: floating rate regime | currency | Economic and Monetary Union | convergence criteria

ABSTRACT
The pressure of the currency consolidation increased in the years 1990 as the world currency system became obviously too complicated and too costly. There are too many national currencies that generate artificial barriers and avoidable transaction costs, both for the domestic economies and for the world economy. The high costs and great vulnerability of the national currencies determined the financial and economic business of small open economies to move into the major currencies of the world. The world needs fewer national currencies, but does it need fewer central banks too? Or it needs central banks capable to pursuit sound monetary policies? What kind of institutional arrangements and international financial architecture are most suitable for the prospective environment of a greatly reduced multiplicity of currencies? A regional currency consolidation may be a good answer but a regional currency union is a better answer. Though, until membership of the Euro zone, what kind of the exchange rate regime is more suitable for Romania and other European Union accession countries? The hard peg regimes seem not to be a good solution. The best solution lays probable between managed floating regimes and intermediate regimes. This may be because emerging markets have both “fear of floating” and “fear of fixing”. But there is no ideal exchange rate regime”to suit everybody”. Once the exchange rate regime chosen, it evolves in time. So is the case with the exchange rate benchmarks for the national currency.
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