References to policy credibility, particularly with regard to fiscal policy, are ubiquitous in both economic literature and financial markets, even though it is not directly observable. The case of the EU new member states (NMS)-emerging markets joining a supranational entity that is generally...

The paper analyzes the forces driving inflation in the new EU10 member countries. A significant part of headline inflation in these countries is due to common factors, such as price level convergence and EU integration. However, idiosyncratic factors have also played a role in the inflation...

Intro -- Contents -- I. INTRODUCTION -- II. OPTIMAL CURRENCY AREA LITERATURE BEFORE 1999 -- III. ESTIMATION METHOD FOR SJAASTAD MODEL -- IV. DATA -- V. ESTIMATION RESULTS -- VI. EUROPEAN ECONOMIES BEFORE AND AFTER THE INTRODUCTION OF THE EURO, AND THE BAYOUMI- EICHENGREEN MODEL -- VII....