A Common Currency for Belarus and Russia?, Issues 2004-2228
International Monetary Fund, Dec 1, 2004 - Monetary unions - 32 pages
This paper discusses costs, benefits, and implementation challenges of a possible currency union between Belarus and Russia. It shows that Belarus and Russia are economically closely linked but nevertheless do not fulfill all "optimal currency area" criteria, especially the macroeconomic symmetry condition. Furthermore, we argue that the different speeds of economic liberalization over the past decade have resulted in different economic structures, with Belarus still dependent on monetary financing of budgets and industries. However, a final cost-benefit analysis also needs to consider that currency unification may bring substantial benefits from reduced transaction costs, an improved macroeconomic environment in Belarus, and by acting as a catalyst to advance structural reforms in Belarus.
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Economic Costs and Benefits of Currency Unification Between Belarus and Russia
Is Operational Environment Supportive of a Currency Unification of Belarus and Russia?
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African Monetary Union agreement assets asymmetric currency unions asymmetric shocks authorities of Belarus banking system Belarus and Russia Belarus Russia Belarusian and Russian Belarusian banks Belarusian government Beltransgaz bilateral trade broad money budget deficit central bank profits common central bank common currency common monetary policy costs and benefits distribution of central economy of Belarus Eichengreen enterprises establishment European Monetary Union exchange rate risk exports financial institutions financial sectors fiscal adjustment fiscal transfers foreign exchange Gazprom hard pegs integration interest rate Joining an existing labor mobility large countries lender of last LOLR facility macroeconomic national central banks optimal currency area percent of GDP percent of total President of Belarus proposed currency union quasi-fiscal activities reduce risk premium Russia sign Russian authorities Russian banks Russian ruble seignorage revenue small countries small member country structural reforms substantial Table tariff Trade Partners transaction costs U.S. dollar unification union between Belarus