Converting EMS to EMU: Why not at Par with Sterling?
AbstractThis paper considers the optimal choice of the numeraire for the curency conversion that will constitute the final step in the transition from EMS to EMU. At the moment it seems to be understood that the current basket-structured ECU will be chosen for this purpose. We argue that this choice is not justified on economic grounds and explore possible alternatives. Our major conclusions are: First, the current ECU is not the cost-minimizing choice of numeraire; it is preferable to use the national currency of an EMS member. Second, The Pound sterling should be the first choice for the numeraire currency. Third, if sterling is politically not feasible because Great Britain does not participate in EMU from the start, the only realistic choice left is the DM.
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Discussion Paper Serie B with number 201.
Length: 21 pages
Date of creation: Nov 1991
Date of revision:
Contact details of provider:
Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de/index.php?id=517
EMS; EMU; Currency Reform; Exchange Rates;
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