Preconditions and Obstacles for Monetary Integration: Prospects for Euroization of Ukraine
DOI:
https://doi.org/10.14665/1614-4007-29-1-002Keywords:
monetary integration, convergence criteria, single currency, Euro Area, economy of UkraineAbstract
Monetary integration may take various forms ranging from exchange rate peg to establishing a monetary union with a single currency and single monetary policy like in the EU. An extended view on the criteria for efficient monetary integration is tested by considering whether Ukraine is ready for monetary integration with the Euro Area (EA). The criteria are grouped into 6 categories: economic openness, intensity of economic relations, integration and convergence with EA, external and internal imbalances. The indicators in Ukraine are compared to the past data and either the values in EA or official thresholds. Currently 2/3 of the criteria are met by Ukraine. The most advanced situation is in economic integration and relations with EA, while lack of convergence with EA is the main obstacle. Nevertheless, Ukraine has made progress by the majority of criteria in comparison to the situation before the Association Agreement was signed, primarily in external balances, economic links and integration with EA. Some negative trends were related to divergence with EA and internal imbalances. If the general positive trend continues, pegging to the euro may become an optimal regime in several years and in the longer run euroization may become a feasible choice for Ukraine.
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