Exchange rate volatility A retrospective view of OCA and Central Eastern European Countries

Abstract

The importance of the optimum currency area theory is increased after creation of European Monetary Union. Before euro currency, the usage of American Dollar regardless OCA theory establishment was not analyzed in the same perspective of an economic policy to control exchange rate regimes. Reviews of researches based on the empirical analyses to provide an examination of the data between countries of Eurozone and Europe, are necessary to rethink the effects of joining a monetary union. Countries which want to enter EMU must fulfill OCA criteria's. A crucial factor is the exchange rate volatility. The paper is a retrospective of Hovarth study and the model enriched by him to analyze the criterias met by CEEC. Before taking a decision we must first interpret accurately the results achieved, and then create possibilities to widen European Monetary union with those countries which are ready to adopt euro, and will experience deeper integration and cycle synchronization ex post. This is an important now day issue, especially following the dynamic changes in European Union.