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Pegging To The Dollar And The Euro

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Author Info
Lane, P
Honohan, P

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Abstract

The newly-launched euro is bound to attract some "trackers"- that is, countries that attempt to maintain exchange rate stability against the euro. In this paper, we ask whether the existence of trackers should be a matter of concern for the European Union. To gain some insight, we review the historical experience of the US with respect to dollar trackers. We identify and analyse the countries most likely to track the euro. Although the aggregate size of potential euro-trackers is small relative to the euro zone, we argue that this does not justify an attitude of benign neglect. Rather, we make recommendations for EU policy towards euro-trackers, arguing in favour of some limited and conditional support for stable bilateral exchange rates.

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Paper provided by Trinity College Dublin, Department of Economics in its series Trinity Economics Papers with number 996.

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Date of creation: 1999
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Handle: RePEc:tcd:tcduee:996

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Find related papers by JEL classification:
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

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.:

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  4. Glick, Reuven & Rose, Andrew K, 1998. "Contagion and Trade: Why are Currency Crises Regional," CEPR Discussion Papers 1947, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March. [Downloadable!] (restricted)
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  12. Honohan, Patrick, 1997. "Miniblocs and Fringe Currencies of the EMU," CEPR Discussion Papers 1704, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  15. Philip Lane, 1998. "What Determines the Nominal Exchange Rate? Some Cross-Sectional Evidence," Economics Technical Papers 9812, Trinity College Dublin, Department of Economics. [Downloadable!]
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  16. Froot, Kenneth A & Stein, Jeremy C, 1991. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1191-217, November. [Downloadable!] (restricted)
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  24. Romer, David, 1993. "Openness and Inflation: Theory and Evidence," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 869-903, November. [Downloadable!] (restricted)
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  25. Robert Flood & Nancy Marion, 1998. "Perspectives on the Recent Currency Crisis Literature," NBER Working Papers 6380, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  26. Allan Drazen & Paul R. Masson, 1993. "Credibility of Policies versus Credibility of Policymakers," NBER Working Papers 4448, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  27. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
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Cited by:
(explanations, 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. Michael B. Devereux & Philip R. Lane, 2002. "Understanding Bilateral Exchange Rate Volatility," Trinity Economics Papers 200211, Trinity College Dublin, Department of Economics. [Downloadable!]
    Other versions:
  2. Gian Maria Milesi-Ferretti & Philip R. Lane, 2007. "Europe and Global Imbalances," IMF Working Papers 07/144, International Monetary Fund. [Downloadable!]
    Other versions:
  3. Philip R. Lane, & Patrick Honohan, 2003. "Divergent Inflation Rates in EMU," The Institute for International Integration Studies Discussion Paper Series iiisdp05, IIIS. [Downloadable!]
    Other versions:
  4. Philip R. Lane, 2006. "Global Bond Portfolios and EMU," The Institute for International Integration Studies Discussion Paper Series iiisdp168, IIIS. [Downloadable!]
    Other versions:
  5. Kawai, Masahiro & Takagi, Shinji, 2000. "Proposed strategy for a regional exchange rate arrangement in post-crisis East Asia," Policy Research Working Paper Series 2503, The World Bank. [Downloadable!]
  6. Michael B. Devereux & Philip R. Lane, 2000. "Exchange Rates and Monetary Policy in Emerging Market Economies," Working Papers 072000, Hong Kong Institute for Monetary Research. [Downloadable!]
    Other versions:
  7. Kawai, Masahiro & Akiyama, Shigeru, 2000. "Implications of the currency crisis for exchange rate arrangements in emerging East Asia," Policy Research Working Paper Series 2502, The World Bank. [Downloadable!]
  8. Iika Korhonen & Mare Randveer, 2000. "Assessment of the Euro\'s implications for European economic development," Bank of Estonia Working Papers 2000-2, Bank of Estonia, revised 11 Oct 2000. [Downloadable!]
  9. Philip Lane & Sébastien Wälti, 2006. "The Euro and Financial Integration," The Institute for International Integration Studies Discussion Paper Series iiisdp139, IIIS. [Downloadable!]
  10. Cotter, John, 2000. "Volatility and the Euro: an Irish perspective," MPRA Paper 3535, University Library of Munich, Germany. [Downloadable!]
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