TY - JOUR AU - Eichengreen,Barry AU - Steiner,Katharina TI - Is Poland at Risk of a Boom-and-Bust Cycle in the Run-Up to Euro Adoption? JF - National Bureau of Economic Research Working Paper Series VL - No. 14438 PY - 2008 Y2 - October 2008 UR - http://www.nber.org/papers/w14438 L1 - http://www.nber.org/papers/w14438.pdf N1 - Author contact info: Barry Eichengreen Department of Economics University of California, Berkeley 549 Evans Hall 3880 Berkeley, CA 94720-3880 Tel: 510/642-2772 Fax: 510/643-0926 E-Mail: eichengr@econ.Berkeley.edu Katharina Steiner vienna university of economics and business admini vienna, austria E-Mail: katharina.steiner@wu-wien.ac.at AB - We ask whether Poland is at risk of the boom-bust problem that has afflicted economies around the time of euro adoption. Our answer, inevitably, is mixed. On the one hand the fact that Poland is an outlier, credit-growth wise, accentuates the danger of a boom if one believes in mean reversion. Our econometrics indicate that the fall in interest rates that will flow from expectations of euro adoption will further feed that boom. On the other hand the fact that interest rates have already converged part way to euro-area levels (and more extensively than in earlier adopters that experienced a sharp fall in rates and a pronounced credit boom), especially in the case of lending to firms, suggests that this shock may be less intense in Poland. And it is certainly conceivable that the same policies and country characteristics (not always visible to the econometrician) that have restrained credit growth in the past may continue to do so in the future. The broader literature also points to two set of factors, the first of which makes the danger of an unsustainable credit boom more immediate, the second of which makes it more remote. In the first category are the continuing limitations of the supervisory framework and the weakness of the finance minister in the budget-making process. In the second are a record of rigorous prudential supervision and the existence of relatively competitive labor markets. ER -