w 109 long-run economic aspects of the european union's eastern ...

ANNEXESThe key item in equation (4) and equation (5) is the expression y euro/y i, whichvaries a lot among the candidates but it is always far above unity; a value of about10-20, resulting from about 20, 000 Euro per capita for the Euro area and as lowas 1-2,000 Euro per capita for some candidates (of course, this is based on GDP innominal terms. For most candidates GDP at PPP is much higher because nontradablesprices are much lower).The gain could thus be large. With a ratio of y euro/y i equal to 15 equation (5) wouldyield:Gaini = 0.05(8× 0.05 – m i) = 0.05(0.4-m i)Even a country with a cash to GDP ratio of 10 % (i.e. a rather strong domesticseigniorage base), the gain would be 0.05× (8× 0.05-0.1)=0.05× 0.3=0.015=1.5%of GDP (see table A3 below for a rough calculation of the gain for the 10 candidates).However, since the 10 candidate countries, even combined, account onlyfor a small percentage of Euro area GDP, their gain (the Euro area’s loss) is minusculeif calculated as percent Euro area GDP.Table A3Seigniorage gain for the candidate from membership to the Eurosystem(compared to a status quo scenario with stable prices)gainm ia iy euro/y i GDP in mln euro in mln euro as % of GDP177Czech Rep. 11.3 2.14 4.2 50100 109 0.22Estonia 8.6 0.29 6.7 4600 33 0.73Hungary 9.6 2.04 5.0 41900 174 0.41Poland 7.2 7.17 5.7 140700 900 0.64Slovenia 3.9 0.49 2.4 17400 54 0.31Wave 1 Sum: 254,700 Sum:1270 Average: 0.46Bulgaria 11.0 1.47 15.5 11000 212 1.92Latvia 12.2 0.45 8.7 5700 48 0.84Lithuania 8.5 0.71 7.9 9600 88 0.91Romania 3.6 3.89 13.6 33900 683 2.01Slovak Rep 10.2 1.06 6.1 18100 102 0.56Wave 2 Sum: 78,300 Sum: 1,132 Average: 0.15Total Sum: 587,700 Sum: 3,671 Average: 0.82Source: Own calculations based on Eurostat data2.1 IMPLICATIONS OF EUROISATION FOR THE ACCOUNTS OFTHE CENTRAL BANK – THE CASE OF ESTONIAThis part applies the theory presented above to the case of Estonia, thus providinga brief analysis of the direct implications of the adoption of the Euro in cash form(‘Euroisation’) for the national central bank. The key point that emerges is that the