CHALLENGES, RISKS AND EFFECTS OF EURO ADOPTION IN BULGARIA

Author: Elena Vladimirova Panayotova (University of National and World Economy)

Keywords: monetary policy, eurozone, ECB, transmission channels

The study aims to analyze the costs, benefits and effects for Bulgaria of joining the euro area. On one hand there are risks for Bulgaria of adopting the euro. The study presents how other countries that have already adopted the euro overcome some of these risks. On the other hand, there are a lot of benefits of joining the euro area. The most substantial are: access to the ECB's monetary policy instruments, improving the country's credit rating, reducing the risk premium, and hence increasing foreign investment, saving transaction costs. The research analyses the transmission channels through which the ECB's monetary policy is passed on Bulgaria. This is expected due to the current currency board and the country's trade. As a result of the analyses, we could conclude that the benefits of adopting the euro in Bulgaria outweigh the costs and risks.

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