Financial Integration and Financial Crisis: Croatia Approaching The EMU

Derado, Dražen

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Financial Integration and Financial Crisis: Croatia Approaching The EMU

Dražen Derado, Faculty of Economics, Split, Croatia

Abstract
The breakdown of command economies has significantly increased growth potentials all over Europe and opened up prospects for economic development. Encouraged by that, the EU embarked on the process of deeper economic integration. Its main aspects – economic liberalization and monetary integration – coincided with the worldwide globalization of trade and capital flows. As a laggard country in the process of economic integration, Croatia is in a particularly difficult position – besides soaring trade deficit, it is highly indebted and strongly dependant upon foreign capital. Appreciating theoretical inferences and empirical evidence on monetary integration, while taking reference to the realized level of international financial integration and external vulnerability, the aim of the paper is to find out if Croatia fulfills the criteria for successful monetary integration.

Keywords: optimum currency area, financial integration, external balance, EMU, Central and Eastern Europe

Year: 2009 | Volume: 33 | Issue: 3 | Pages: 299 - 328

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