The External Policy of the Euro Area: Organizing for Foreign Exchange Intervention
AbstractScholarship on European integration has extensively debated the external character of the monetary union. The institutions of exchange rate policymaking bear substantially on the euro area’s role in international monetary conflict and cooperation. This working paper examines the institutional arrangements for foreign exchange intervention within the euro area and the policymaking surrounding the market operations of autumn 2000—the only case to date of euro area intervention in currency markets. Drawing on interviews of officials in finance ministries, central banks, European institutions, and international organizations, as well as public sources, the paper specifies the division of labor among the European Central Bank (ECB), Eurogroup, and other European actors and compares that arrangement with corresponding arrangements in the G-7 partners. It concludes, among other things, that (1) the interinstitutional understanding within the euro area gives substantial latitude to the ECB, greater latitude than held by central banks in its G-7 partners, (2) but the understanding is susceptible to renegotiation over time, and (3) economic divergence within the euro area potentially threatens the ability of the monetary union to act coherently externally.
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Bibliographic InfoPaper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP06-4.
Date of creation: Jun 2006
Date of revision:
Foreign Exchange Intervention; Exchange Rate Policy and Policymaking; Economic and Monetary Union; Euro-Dollar Exchange Rate; European Central Bank; Eurogroup; G-7 Cooperation; Transatlantic Monetary Relations; Political Economy of Exchange Rates;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-02 (All new papers)
- NEP-CBA-2006-07-02 (Central Banking)
- NEP-EEC-2006-07-02 (European Economics)
- NEP-IFN-2006-07-02 (International Finance)
- NEP-MON-2006-07-02 (Monetary Economics)
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