Business, 09.04.2021 03:30 izzynikkie

Suppose that applying for membership in the European Monetary Union (EMU) is expensive, so three hypothetical countries, Baltia, Polsha, and Atlantida, have come to you with their relevant data and want advice on if they should apply to join the EMU. Suppose that the average inflation rate of the three European countries with the lowest inflation rates is 3.0%, and the average long-term interest rate of those countries is 3.2%. Evaluate the characteristics of Baltia, Polsha, and Atlantida presented in the following table using the Maastricht convergence criteria. Then, complete the bottom row by identifying whether each country is eligible to become an EMU member.
Criteria Baltia Polsha Atlantida
Inflation 4.5% 4.0% 4.1%
Long-term interest rates 5.0% 4.0% 3.0%
Exchange rates Last devaluated three years ago Stable Stable
Budget deficit 2.4% of GDP 3% of GDP 2.1% of GDP
Debt outstanding 45% of GDP 45% of GDP 46% of GDP
Qualifies to enter the EMU ? ? ?

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