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Exchange rate systems and macroeconomic stability

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  • Collard, Fabrice
  • Dellas, Harris

Abstract

We examine macroeconomic stability and the properties of the international transmission of business cycles under three exchange rate systems: a flexible, a unilateral peg and a single currency. The subjects of study are Germany and France. EMU increases output and decreases inflation variability in Germany but it has the opposite effect in France. It induces a strong negative international transmission of country specific supply shocks and amplifies the role of German supply shocks. These two facts may complicate ECB policy-making.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 49 (2002)
Issue (Month): 3 (April)
Pages: 571-599

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Handle: RePEc:eee:moneco:v:49:y:2002:i:3:p:571-599

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Web page: http://www.elsevier.com/locate/inca/505566

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  9. Baxter, Marianne & Stockman, Alan C., 1989. "Business cycles and the exchange-rate regime : Some international evidence," Journal of Monetary Economics, Elsevier, vol. 23(3), pages 377-400, May.
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  11. Devereux, Michael B & Engel, Charles M, 2000. "Monetary Policy In The Open Economy Revisited: Price Setting Rules And Exchange Rate Flexibility," CEPR Discussion Papers 2454, C.E.P.R. Discussion Papers.
  12. Peter Brandner & Klaus Neusser, 1992. "Business cycles in open economies: Stylized facts for Austria and Germany," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 128(1), pages 67-87, March.
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