Presentation on theme: "Slovenian Approach to EMU Boštjan Jazbec Member of the Governing Board The views expressed herein are those of the author and not necessarily those of."— Presentation transcript:
Slovenian Approach to EMU Boštjan Jazbec Member of the Governing Board The views expressed herein are those of the author and not necessarily those of the Bank of Slovenia.
Contents Macroeconomic Stabilization and Transition Macroeconomic Perfomance Maastricht Criteria Entry to ERM2 and Adoption of Euro Conclusions
Macroeconomic Stabilization and Transition Better initial conditions than in other transition economies Money-based stabilization program Rehabilitation of the banking sector Sound macroeconomic performance Inflation
GDP per capita
Openness (exports and imports in % GDP)
Foreign Trade with EU (in % of export and import, 2001)
Public Debt (% GDP; ESA95)
Relative Price Convergence
Y-on-Y Final Quarter Inflation
Synchronization of Business Cycles
GDP Composition by Activity
Banking Sector by Total Assets
Slovenia vs. Greece vs. Portugal
Disinflation Trend in Slovenia The disinflation trend displays a breaks due to a combination of shocks in 1999: introduction of the VAT, demand boom, oil shock.
Exchange Rate Pass-Through
ERM2 - Why as Early as Possible? Are there any reasons to wait? Can small open economy run independent monetary policy? Sound macroeconomic performance
ERM2 Risks Capital inflows entail risks of volatility and exchange rate pressures Credit demand and booms: –low interest rates, demand boom and falling saving ratios can produce overheating, CA deficit and asset price bubbles. Balassa-Samuelson effect may generate inconsistencies between the inflation and exchange rate criteria. –Estimates for Slovenia range between 1 and 1.5%.
ERM2 Policy Mix Joint program between BoS and the Slovenian Government from Nov Monetary policy : ER management in line with the ERM2 criterion. BoS has acquired experience and designed its instruments to stabilize the ER movements. Fiscal measures : low fiscal deficits, counter-cyclical spending, reduced rigidities and formula- driven social transfers, buffer stock relative to the Stability and Growth Pact (SGP). Wage and price flexibility needed to absorb asymmetric shocks (progressive deindexation). Synchronization of activity with euro area implies a consistency with the ECB stance. Financial market supervision Appropriate central parity