When to Join the Eurozone: An Empirical Analysis

The paper is the first part of a broader empirical study that considers the entry timing of accession economies into the eurozone and their exchange-rate regimes between the EU entry and prior to the eurozone entry. The presented empirical analysis is based on model simulations and on the outcomes of previous work related to panel estimates of model equations for five accession economies. The first conclusion is that is not possible to search for one-for-all answers as to timing and exchange-rate regimes. Each of the accession countries should decide in accordance with specific country characteristics. According to our analysis, Poland could benefit most from entering the eurozone relatively quickly, while the Czech Republic and Hungary may benefit from a more cautious approach. This diversity reflects different characteristics such as openness, flexibility, and financial wealth. Postponing entry after 2009 would likely carry fewer additional benefits, however.