Macedonian Convergence and the Role of Exchange Rate in the Run-Up to EU Accession

Boskov, Tatjana and Sajnoski, Krste and Georgi, Angelov (2018) Macedonian Convergence and the Role of Exchange Rate in the Run-Up to EU Accession. IJIBM International Journal of Information, Business and Management, 10 (1). pp. 108-122. ISSN 2076-9202 (Print)/2218-046X (Online)

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To cope with competitive pressures and market forces within the EU in the medium-term, the SEE6 needs
to address important challenges through determined implementation of structural reforms. Progress with
structural reforms can help for macroeconomic stability, for example, by reducing the structural external
deficits. Also it helps nominal convergence, as the productivity realizes the improvement of
competitiveness and helps disinflation by maintaining low unit cost. So in terms of macroeconomic
convergence for SEE6 countries and the case of Macedonia, EU membership requires convergence of the
Macedonian economy with that of the EU in realistic conditions, indicating income per capita and
economic structure, and in nominal terms, meaning convergence of prices, inflation and interest rates.
Also, in the paper the focus is on the importance of the exchange rate regime as available tool in meeting
the requirements needed for entering into the EU. Using the exchange rate as anchor for inflationary
expectations, on long run have been effective so far, producing a low and stable inflation rates. However,
in periods of low inflation and deflationary pressures, exchange rate anchors do not allow sufficient
space for fiscal and monetary stimulus. In this respect, policy makers are under following dilemma: to
deviate from exchange rate anchor and increase the space for fiscal and monetary stimulus; to accelerate
structural reforms and competitiveness and on short run deepen the recessionary pressures; and to increase foreign debt and thus increase scope for fiscal and monetary stimulus while preserving the
exchange rate anchor.

Item Type: Article
Subjects: Social Sciences > Economics and business
Divisions: Faculty of Tourism and Business Logistics
Depositing User: Tatjana Boskov
Date Deposited: 01 Nov 2017 14:21
Last Modified: 01 Nov 2017 14:21

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