Advertisement

EMU and Transatlantic Exchange Rate Stability

  • Agnès Bénassy-Quéré
  • Benoît Mojon
Chapter

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.

Keywords

Exchange Rate Interest Rate Monetary Policy Euro Area Real Exchange Rate 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Artus, P. (1997a), “The Degree of Openness of the Economy and the Weight of the External Objective of the Central Bank,” Caisse des Dépôts et Consignations Working Paper 97–07- El.Google Scholar
  2. Artus, P. (1997b), “Will European Monetary Unification Force the Fed to Change its Monetary Policy Objectives ?” Caisse des Dépôts et Consignations Working Paper 97–08- El.Google Scholar
  3. Barran, F., Coudert, V. and B. Mojon (1996), “L’Union Européenne est-elle une zone homogène pour la politique monétaire?” Economie Internationale, 65: 93–122.Google Scholar
  4. Bénassy, A., Mojon, B. and J. Pisani-Ferry (1997), “The Euro and Exchange Rate Stability,” in EMU and the International Monetary System, P.R. Masson, T.S. Krueger and B.G. Turtleboom, eds. Washington: International Monetary Fund, pp. 157–93.Google Scholar
  5. Bernanke, B. and I. Mihov (1997), “What Does the Bundesbank Target ?” European Economic Review, 41: 1025–54.CrossRefGoogle Scholar
  6. Clarida, R. and M. Gertler (1996), “How Does the Bundesbank Conduct Monetary Policy ?” NBER Working Paper no. 5581.Google Scholar
  7. Cohen, D. (1997), “How Will the Euro Behave?” in EMU and the International Monetary System, P.R. Masson, T.S. Krueger and B.G. Turtleboom, eds. Washington: International Monetary Fund, pp. 397–417.Google Scholar
  8. Deutsche Bundesbank (1996), Makro-ökonometrisches Mehr-Länder-Modell. Frankfurt am Main: Deutsche Bundesbank.Google Scholar
  9. Equipe Mephisto (1996), “Version 2 du système financier français de la Banque de France,” Banque de France, Cahiers Economiques et Monétaires, 42: 41–95.Google Scholar
  10. European Commission (1990), “One Market, One Money,” European Economy 44.Google Scholar
  11. Flood, R., and A. Rose (1995), “Fixing Exchange Rates: A Virtual Quest for Fundamentals,” Journal ‘of Monetary Economics, 36: 3–37.CrossRefGoogle Scholar
  12. Martin, Ph. (1997), “The Exchange Rate Policy of the Euro: A Matter of Size?” CEPR Discussion Paper no. 1646.Google Scholar
  13. Masson, P., and S. Symansky (1992), “Evaluating the EMS and EMU Using Stochastic Simulations: Some Issues,” in The ERM and Monetary Union, R. Barrell and J. Whitley, eds. London: SAGE Publications.Google Scholar
  14. Masson, P., and B. Turtleboom (1997), “Characteristics of the Euro, the Demand for Reserves, and Policy Coordination under EMU,” in EMU and the International Monetary System, P.R. Masson, T.S. Krueger and B.G. Turtleboom, eds. Washington: International Monetary Fund, pp. 194–224.Google Scholar
  15. Masson, P., Krueger T.S., and B. Turtleboom, eds. (1997), EMU and the International Monetary System. Washington: International Monetary Fund.Google Scholar
  16. Meese, R. and K. Rogoff (1983), “Empirical Exchange Rate Models in the Seventies: Do They Fit out of Sample?” Journal of International Economics, 14: 3–24.CrossRefGoogle Scholar
  17. Minford, P., Rastogi, A. and A. Hughes Hallett (1990), “The European Monetary System: Achievements and Survival,” CEPR Discussion Paper no. 502.Google Scholar
  18. Minford, P., Rastogi, A. and A. Hughes Hallett (1992), “The Price of EMU Revisited,” CEPR Discussion Paper no. 656.Google Scholar
  19. Obstfeld, M. (1995), “International Currency Experience: New Lessons and Lessons Relearned,” Brookings Papers on Economic Activity, 1.Google Scholar
  20. OFCE (1996), “Structures et propriétés de cinq modèles macroéconométriques français,” OFCE Working Paper no. 96–04.Google Scholar
  21. Taylor, J. (1993), Macroeconomic Policy in a World Economy. London: Norton and Company.Google Scholar
  22. Thibault, F. (1996), “Output gaps et output gaps relatifs: un état des lieux pour les principaux pays de OCDE,” French Ministry of Economy and Finance, Direction de la Prévision, note B5–96217.Google Scholar

Copyright information

© Springer Science+Business Media New York 2001

Authors and Affiliations

  • Agnès Bénassy-Quéré
    • 1
  • Benoît Mojon
    • 2
  1. 1.CEPIIFrance
  2. 2.European Central BankFrance

Personalised recommendations