Working Paper Number

2018-13

Journal or Book Title

UMass Amherst Economics Working Papers

Publication Date

2018

Abstract

Unilateral euroization is underexplored even in comparison to unilateral dollarization (taken to mean the adoption of the US dollar as legal tender). This paper attempts to partly fill this gap in the literature by investigating the case of Montenegro, which is one of the two countries that have unilaterally adopted the euro as the legal tender. Montenegro's limited monetary policy options make the nature of business cycles important. The evidence presented here suggests that Montenegro has a low degree of synchronization, limited structural similarity, and weak trade integration with the Eurozone. Moreover, there is limited evidence for endogenous structural assimilation following euroization. The case for currency union is weak for Montenegro and appears to be defensible only on grounds of policy credibility.

License

UMass Amherst Open Access Policy

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Economics Commons

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