The first paper in this issue deals with Slovenia's adoption of the euro. Although Slovenia was the closest among the new members to the "old" EU member countries in terms of per capita income, its ability to restrain inflation in the 1990s was modest at best. This seeming inability to restrain inflation raised some doubts about the country's ability to thrive under ERM II and subsequently with the euro as its currency. The authors, Arjana Brezigar Masten and Igor Masten attribute much of the inflation of the pre-euro period to exchange rate pass-through effects that occurred within a monetary framework that was based on real exchange rate targeting.
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