Abstract
The macroeconomic debate about EMU has always focused on the costs and the benefits of suppressing exchange rates between the participating countries. These costs and benefits actually depend on whether the exchange rate is a useful adjustment instrument or an additional source of instability. For instance, the end of the Bretton Woods system failed to isolate the economies from shocks coming from their partners’ or help them to adjust to domestic shocks as flexible exchange rates did not translate into a reduced instability of other macroeconomic variables (Flood and Rose, 1995). Hence, the costs of fixing the intra-European exchange rates in terms of increased macroeconomic instability and specifically on the transatlantic exchange rate are far from certain.
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Bénassy-Quéré, A., Mojon, B. (2001). EMU and Transatlantic Exchange Rate Stability. In: Moser, T., Schips, B. (eds) EMU, Financial Markets and the World Economy. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-5131-4_4
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DOI: https://doi.org/10.1007/978-1-4757-5131-4_4
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