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The EURO, Prudent Coherence?

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Author Info
Ivo J.M. Arnold (Nijenrode University)
Casper G. de Vries () (Erasmus University Rotterdam)

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Abstract

A flurry of recent articles has argued on the basis of constructed European wide monetary aggregates that the demand for EURO's will be more stable than the current demand for national currencies. In policy circles this seemingly moderating effect of monetary integration figures as an additional argument pro union. On the basis of the standard foreign exchange rate model we argue that once the uncoordinated country specific money supply system is abolished, the coherence between local monetary aggregates increases dramatically, leaving little room for a free ride on the law of large numbers. The only road towards stability is prudent monetary policy.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 98-070/2.

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Date of creation: 23 Jun 1998
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Handle: RePEc:dgr:uvatin:19980070

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Browne, F.X. & Fagan, G. & Henry, J., 1997. "Money Demand in EU Countries : A Survey," Papers 7, European Monetary Institute.
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  2. Ivo Arnold, 1994. "The myth of a stable European money demand," Open Economies Review, Springer, vol. 5(3), pages 249-259, July. [Downloadable!] (restricted)
  3. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February. [Downloadable!] (restricted)
  4. Timothy D. Lane & Paul R. Masson & Marcel Cassard, 1994. "ERM Money Supplies and the Transition to EMU," IMF Working Papers 94/1, International Monetary Fund.
  5. Fatas, Antonio, 1997. "EMU: Countries or regions? Lessons from the EMS experience," European Economic Review, Elsevier, vol. 41(3-5), pages 743-751, April. [Downloadable!] (restricted)
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  6. Artis, Michael J & Zhang, Wenda, 1995. "International Business Cycles and the ERM: Is there a European Business Cycle?," CEPR Discussion Papers 1191, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Süppel, Ralph & von Hagen, Jürgen, 1994. "Central Bank Constitutions for Monetary Unions," CEPR Discussion Papers 919, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  8. von Hagen, Jurgen & Suppel, Ralph, 1994. "Central bank constitutions for federal monetary unions," European Economic Review, Elsevier, vol. 38(3-4), pages 774-782, April. [Downloadable!] (restricted)
  9. Monticelli, Carlo & Strauss-Kahn, Marc-Olivier, 1993. "European Integration and the Demand for Broad Money," The Manchester School of Economic & Social Studies, Blackwell Publishing, vol. 61(4), pages 345-66, December.
  10. Spencer, Peter, 1997. "Monetary integration and currency substitution in the EMS: The case for a European monetary aggregate," European Economic Review, Elsevier, vol. 41(7), pages 1403-1419, July. [Downloadable!] (restricted)
  11. Katrin Wesche, 1997. "The demand for divisia money in a core monetary union," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 51-60. [Downloadable!]
  12. David Backus & Silverio Foresi & Chris Telmer, 1996. "Affine Models of Currency Pricing," NBER Working Papers 5623, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
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  1. Bernd Hayo, 1999. "The Demand For Money In Austria," Macroeconomics 9902012, EconWPA. [Downloadable!]
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  2. Ivo J.M. Arnold & Casper G. de Vries, 1999. "Endogenous Financial Structure and the Transmission of ECB Policy," Tinbergen Institute Discussion Papers 99-021/2, Tinbergen Institute. [Downloadable!]
  3. Peter Brandner & Helene Schuberth, 1999. "Efficiency and Transparency of the Monetary Policy Strategy of the ESCB," WIFO Monatsberichte (monthly reports), WIFO, vol. 72(1), pages 61-73, January. [Downloadable!] (restricted)
  4. Bernd Hayo, 1998. "Estimating a European Demand for Money," Macroeconomics 9811008, EconWPA. [Downloadable!]
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