Where Do the Newest EU Member States Stand on the Road to Monetary Integration?

The present study sheds light on important aspects of monetary integration in the European Union involving the newest member states. It assesses the degree to which they satisfy the business cycle correlation criteria. Our results demonstrate that there is a common business cycle in the Euro area and that most of the candidate countries exhibit convergence with this group, with the remarkable exception of Estonia, Lithuania, Slovakia and Romania. Bulgaria shows better achievements than Romania in terms of business cycle synchronization with the Euro zone.This paper was presented at the 18th International Conference of the International Trade and Finance Association meeting at Universidade Nova de Lisboa, Lisbon, Portugal, on May 23, 2008.