This treatise emphasizes a potential trade-off between nominal interest and exchange rate impulses in the European Monetary Union. More generally, joining members of any monetary union are likely to experience considerable macroeconomic effects due to lasting changes in interest and exchange rates – relative to a situation without monetary union. These changes are caused by the transiton to the monetary union, because central bank interest rates are equalized and exchange rates are fixed.
KeywordsExchange Rate Interest Rate Monetary Union Nominal Interest Rate Nominal Exchange Rate
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