Official Euroisation of Bulgaria

Nikolay Nenovsky (UNWE, BNB)* Kalin Hristov (UNWE, BNB)

OFFICIAL EUROISATION OF BULGARIA: PROS AND CONS

May 2001

Summary: The article presents in a systematised form the costs and benefits of the potential euroisation of Bulgaria in the process of EU and EMU accession. Given that Bulgaria is under a currency board arrangement, the focus is placed on the comparison between euroisation and the currency board arrangement currently in place. Arguments are provided in support of the statement that the euro needs a quick introduction on the Balkans and in Bulgaria, so that it could occupy a strategic position in the future geography of money.

JEL classification: E58, F33, F36 Key words: monetary regime, euroisation, currency board, Bulgaria, accession process

I.

*

Introduction

nenovsky.n@bnbank.org or nenovsky@mail.netplus.bg and hristov.k@bnbank.org.

The views expressed in this article are those of the authors and do not necessarily reflect BNB policy. Kalina Dimitrova provided a technical assistance in the research process. We appreciate the comments of Ivan Stoykov and Malinka Koparanova.

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Nenovsky, N., K. Hristov, Euroisation of Bulgaria May 2001

The financial and currency crises during the second half of the 90s once again brought to the fore the issue of the choice of optimal foreign exchange and monetary regime. The official dollarisation (euroisation) was among the most often advanced solutions, which received great recognition (popularity), both in Latin America and Asia, and in the countries negotiating for European Union (EU) and European Monetary Union (EMU)1 membership. A number of countries already abandoned their national currencies and adopted the dollar (Ecuador, Salvador, Guatemala and East Timur) or the euro as an official legal tender (Montenegro)2. In Europe, the debates on euroisation as monetary regime were and are still perceived as part of the process of accession of the Central and East European economies in...