HOME CURRENCY PEGGED INTO EURO – POSSIBLE SOLUTION FOR ROMANIAN’S ECONOMY

Abstract

The stable exchange rate is very important in international trade. This paper aims to show how exchange rate facilitates the economic growth and all economic conditions of a country, within the time 2008 – 2016. This paper is aimed to be unique because will study the effect of exchange rate on sustainable development, giving a special attention to those countries which have their home currencies pegged to Euro. Conducting the research on foreign exchange regime, it appears that are my papers related to pegging the currency to US dollar, but none to focus on pegging the exchange rate into Euro. The research developed revealed that there are three cases: countries which have their currency pegged to Euro and they are members of European Union (Bulgaria and Denmark); countries which have their currency pegged to Euro but they are still not members of European Union (Bosnia and Herzegovina); and, countries which are member of European Union but they don’t have their currency pegged to Euro or any other international currency (Czech Republic, Hungary, Romania). The analysis was conducted based on official data and find that there is a very strong connection between exchange rate and annual growth, inflation, balance of payment, foreign investments, and unemployment