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Exchange-Rate and Interest-Rate Driven Competitive Advantages in the EMU

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  • Andrén, Niclas

    ()
    (Department of Business Administration)

  • Oxelheim, Lars

    ()
    (The Research Institute of Industrial Economics)

Abstract

Real exchange and interest rates may still fluctuate inside the EMU and give rise to changes in competitiveness. We find, in contrast to what is generally expected, no convergence in these variables after the introduction of the euro. On the contrary, a divergence is found that is extraordinary when compared to the preceding 40 years. The magnitude of the divergence should urge on a wave of restructuring in the EMU, conditioned upon adequate policy responses. The worst-case scenario involves a flight to structural support and protectionism, challenging the whole idea of the EMU.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 576.

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Length: 31 pages
Date of creation: 12 Mar 2002
Date of revision:
Handle: RePEc:hhs:iuiwop:0576

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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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Keywords: Real Exchange Rates; Real Interest Rates; EMU; Competitive Advantage; Restructuring;

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  1. Oxelheim, Lars & Randøy, Trond, 2001. "The Impact of Foreign Board Membership on Firm Value," Working Paper Series 567, Research Institute of Industrial Economics.
  2. Feldstein, Martin, 2000. "The European Central Bank and the Euro: The First Year," Journal of Policy Modeling, Elsevier, vol. 22(3), pages 345-354, May.
  3. Pinelopi K. Goldberg & Michael M. Knetter, 1996. "Goods Prices and Exchange Rates: What Have We Learned?," NBER Working Papers 5862, National Bureau of Economic Research, Inc.
  4. Oxelheim, Lars & Rafferty, Michael, 2005. "On the static efficiency of secondary bond markets," Journal of Multinational Financial Management, Elsevier, vol. 15(2), pages 117-135, April.
  5. Feldstein, Martin, 2000. "The European Central Bank and the Euro: The First Year," Scholarly Articles 3043424, Harvard University Department of Economics.
  6. Lars Oxelheim & Clas Wihlborg, 2003. "Recognizing Macroeconomic Fluctuations In Value Based Management," Journal of Applied Corporate Finance, Morgan Stanley, vol. 15(4), pages 104-110.
  7. Andreas Beyer & Jurgen A. Doornik & David F. Hendry, 2000. "Reconstructing Aggregate Euro-zone Data," Journal of Common Market Studies, Wiley Blackwell, vol. 38(4), pages 613-624, November.
  8. European Commission, 2001. "EMU: The First Two Years," Papers 42, Commission of the EEC - Euro Papers.
  9. Eichengreen, Barry, 2000. "The Euro One Year On," Journal of Policy Modeling, Elsevier, vol. 22(3), pages 355-368, May.
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