Macroeconomic impacts of European union membership of central and eastern European economies

This paper examines the impact of an eastern enlargement of the European Union. This is modeled as an increase in total factor productivity and a decrease in the risk premium for the central and eastern European countries (CEECs). In particular, a multicountry model of the world economy is used to assess the direct effects and spillovers of these changes. Inflation targeting for the euro zone by the European Central Bank and alternative scenarios with respect to fiscal policy behavior in the CEECs are considered. According to these simulations, productivity effects are stronger than risk premium effects, and spillovers are small.