Montenegro's unilateral adoption of the Euro
Introduction:
Many authors have argued that ERMII is not an appropriate mechanism for the transition economies (De Grauwe, 2002). Indeed, some have gone beyond arguing for the necessity of altering the Maastricht criteria to advocating a move to unilateral adoption of the Euro outright (Nuti, 2002). This recommendation is strongly resisted by the ECB which requires a country to become a member of EMU before adopting the Euro. This in turn requires a long period of convergence in economic policies and outcomes. But there is already an example of this unilateral euroisation to hand: Montenegro. As it strove for independence from the rump Federal Republic of Yugoslavia, Montenegro decided to adopt the Euro unilaterally rather than create its own currency. What light, then, can Montenegro's experience shed on this debate? Or are its circumstances too specific to draw more general policy prescriptions?