The equilibrium exchange rates of European currencies and the transition to euro
AbstractThe introduction of the euro raised two questions: what was the appropriate exchange rate of the European currencies for entry in the EMU? What were the main determinants of the external value of the euro? To bring some insight in the matter, the concept of equilibrium exchange rates was used, which illustrated the divergence between exchange rates and long run fundamentals. For each country, the equilibrium exchange rate was calculated from a simplified model of external trade which, in its reduced form, allows one to explicitly represent the structural determinants of exchange rates. To obtain supplementary results we also make an analysis of unit cost levels. The results suggest that although the central parities in force within the EMS were rather satisfactory and ought not to give rise subsequently to intra-European tensions, the European currencies were overvalued in terms of their equilibrium exchange rates and the dollar was undervalued. This misalignment thus provides support to justify the depreciation of the euro since its launch.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 33 (2001)
Issue (Month): 14 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RAEC20
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Se-Eun Jeong & Jacques Mazier & Jamel Saadaoui, 2010.
"Exchange Rate Misalignments at World and European Levels: a FEER Approach,"
CEPII research center, issue 121, pages 25-58.
- Se-Eun Jeong & Jacques Mazier & Jamel Saadaoui, 2010. "Exchange Rate Misalignments at World and European Levels: a FEER Approach," Post-Print halshs-00435836, HAL.
- Saadaoui, Jamel, 2012.
"Déséquilibres globaux, taux de change d’équilibre et modélisation stock-flux cohérente
[Global Imbalances, Equilibrium Exchange Rates and Stock-Flow Consistent Modelling]," MPRA Paper 51332, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.