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EMU, The Euro and The European Policy Mix

Author

Listed:
  • Jonathan Coppel
  • Martine Durand
  • Ignazio Visco

Abstract

One year ago most economic observers predicted that "fundamentals" were such that the euro was set to appreciate. In the event, the opposite has occurred. This has rekindled a debate on how well foreign exchange markets reflect fundamental determinants and led to calls for greater exchange rate stability, possibly through the introduction of formal exchange rate target zones. The first part of the paper focuses on these issues. It also looks at the euro’s prospects as an international currency. To give a better sense of perspective, the paper compares recent exchange rate movements and measures of volatility with longerterm trends. The article argues that the difference in cyclical conditions in the United States and the euro area seems to have been a dominant factor driving the sizeable euro depreciation since early 1999, although when evaluated against longer term trends it appears much less dramatic; the euro is presently at about its past 5-year average level expressed in nominal effective terms ... Il y a un an, la plupart des observateurs économiques prévoyaient qu'au vu des "fondamentaux" l'euro allait s'apprécier. En l’occurrence le contraire a eu lieu. Ceci a ravivé le débat sur la capacité des marchés de changes à refléter les déterminants fondamentaux des économies et a donné lieu à des appels pour une plus grande stabilité des taux de change, passant par exemple par l'introduction formelle de zones cibles. La première partie de ce document porte sur ces questions. Elle considère également les perspectives pour l'euro à devenir une monnaie internationale. Afin de mieux appréhender les évolutions récentes de taux de change et leur volatilité, ces dernières sont comparées à leurs tendances de long terme. Le document montre que la divergence de position conjoncturelle entre les États-Unis et la zone euro semble avoir été un facteur déterminant dans la dépréciation importante de l'euro depuis le début de 1999, même si, sur plus longue période, cette dépréciation apparaît ...

Suggested Citation

  • Jonathan Coppel & Martine Durand & Ignazio Visco, 2000. "EMU, The Euro and The European Policy Mix," OECD Economics Department Working Papers 232, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:232-en
    DOI: 10.1787/524744315352
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    Citations

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    Cited by:

    1. repec:hal:wpspec:info:hdl:2441/2942 is not listed on IDEAS
    2. Philip Arestis & Iris Biefang-Frisancho Mariscal & Andrew Brown & Malcolm Sawyer, 2001. "The Causes of Euro Instability," Economics Working Paper Archive wp_324, Levy Economics Institute.
    3. Ignazio Visco, 2000. "Perspectives on OECD economic integration : implications for U.S. current account adjustment : commentary," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 209-231.
    4. repec:spo:wpecon:info:hdl:2441/2942 is not listed on IDEAS
    5. Renato Filosa, 2003. "Shock monetari e reali, ciclo economico e valore dell' euro," Moneta e Credito, Economia civile, vol. 56(223), pages 295-324.
    6. Renato Filosa, 2004. "Monetary and real shocks, the business cycle and the value of the euro," BIS Working Papers 154, Bank for International Settlements.
    7. Philip Arestis & Andrew Brown & Kostas Mouratidis & Malcolm Sawyer, 2002. "The Euro: Reflections on the first three years," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(1), pages 1-17.
    8. Jérôme Creel & Jacky Fayolle, 2002. "La Banque centrale et l'Union monétaire européennes : les tribulations de la crédibilité," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 211-244.
    9. repec:hal:spmain:info:hdl:2441/2942 is not listed on IDEAS
    10. Chinn, Menzie David, 2000. "The empirical determinants of the Euro: Short and long run perspectives," SFB 373 Discussion Papers 2000,43, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    11. Bas van Aarle & Harry Garretsen & Florence Huart & Bas Van Aarle, 2003. "Transatlantic Monetary and Fiscal Policy Interaction," CESifo Working Paper Series 1042, CESifo.

    More about this item

    Keywords

    dosage de la politique économique; EMU; exchange rate regimes; exchange rates; policy mix; régime de taux de change; taux de change; UME;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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