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How to Fix Conversion Rates at the Start of EMU

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  • De Grauwe, Paul
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    Abstract

    This paper analyses several procedures for fixing conversion rates at the start of EMU. One consists of announcing a fixed conversion rate; a second (proposed by Lalmfalussy) would announce that the conversion rate will be an average of past market exchange rates; and a third involves announcing that the market exchange rate observed just prior to entry will be the conversion rate. The paper evaluates these different procedures and concludes that the Lamfalussy rule is unattractive compared to the two other alternatives.

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    File URL: http://www.cepr.org/pubs/dps/DP1530.asp
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    Bibliographic Info

    Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1530.

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    Date of creation: Nov 1996
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    Handle: RePEc:cpr:ceprdp:1530

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    Related research

    Keywords: Exchange Rate; Maastricht Treaty; Monetary Integration;

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    Cited by:
    1. Katsimi, Margarita, 2008. "Exchange rate strategies towards the euro-zone for new EU member states with currency boards," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1043-1063, September.
    2. A. Frachot, 1997. "How To Stabilize Financial Markets Before EMU ?," International Finance 9707004, EconWPA.
    3. Wilfling, Bernd, 2009. "Volatility regime-switching in European exchange rates prior to monetary unification," Journal of International Money and Finance, Elsevier, vol. 28(2), pages 240-270, March.
    4. Mark Trede & Bernd Wilfling, 2007. "Estimating exchange rate dynamics with diffusion processes: an application to Greek EMU data," Empirical Economics, Springer, vol. 33(1), pages 23-39, July.
    5. Obstfeld, Maurice, 1998. "A strategy for launching the Euro," European Economic Review, Elsevier, vol. 42(6), pages 975-1007, June.
    6. Uctum, Merih & Deusy-Fournier, Pierre, 1998. "Le dollar et l’euro : la primauté monétaire de l’Europe a-t-elle une place?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 74(4), pages 669-694, décembre.
    7. Bronka Rzepkowski, 1997. "Impact de l'annonce de la modalité de fixation des taux de conversion des monnaies européennes," Économie et Prévision, Programme National Persée, vol. 128(2), pages 145-159.
    8. Wilfling, Bernd, 2001. "Interest rate volatility prior to monetary union under alternative pre-switch regimes," HWWA Discussion Papers 143, Hamburg Institute of International Economics (HWWA).

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