Economic and Political Implications of Credit Euroization: The Case of Macedonia

Removal of all obstacles to international trade and financial flows, and the development of communications and Internet technology contribute to the direct connection of all financial centers and markets in the world.Thus they become internationally integrated, which use different currencies as a result of the exchange process. The constant currency exchange is carried out with various arrangements and exchange rates. While movements in exchange rates have significant effects on the same and can be left its profound effects on sales, costs, profits. So the choice of exchange rate regime is an important aspect of economic development of the competitiveness of a country, macroeconomic stability. Considering the exchange rate experience of Macedonia, it’s likely to remain significantly euroized country for an extended period. IMF considers that the appropriate strategy is the one which provides support for the gradual de-euroization for maintaining macro-prudential policy, development of the domestic market and maintain prudent policies that mitigate the risks of foreign currency. The investigation indicates that macroprudential policies are becoming an important driver of de-euroization. In terms of other drivers of euroization the findings of this analysis support the conventional view that deposit euroisation and the interest rate differentials were the main determinants of credit euroization in Macedonia. Also, this paper analyzes political implications of credit euroization in Macedonia