IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

A strategy for launching the Euro

  • Obstfeld, Maurice

This paper analyses the constraints European Union law places on the 1 January 1999 choices of irrevocably fixed conversion rates between the euro and the currencies of EMU members states. Current EU legislation, notably the Maastricht Treaty, requires that the bilateral currency conversion factors implied by the 1 January 1999 choices equal closing market exchange rates on 31 December 1998. Given that legal constraint, there still exist several strategies for choosing the relative prices of EMU member currencies against the euro. Unfortunately, most of these have potentially damaging side effects. One approach, based on official Stage 2 offers of contingent euro forward contracts with value dates at the start of Stage 3, allows a highly credible preannouncement of the bilateral currency conversion factors to be set at the start of EMU. That approach assumes, however, that no prospective EMU members can withdraw between their selection in May 1998 and the start of Stage 3.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 42 (1998)
Issue (Month): 6 (June)
Pages: 975-1007

in new window

Handle: RePEc:eee:eecrev:v:42:y:1998:i:6:p:975-1007
Contact details of provider: Web page:

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.:

as in new window
  1. De Grauwe, Paul, 1997. "The Indeterminacy of the Euro Conversion Rates. Why it Matters and How it can be Solved," CEPR Discussion Papers 1677, C.E.P.R. Discussion Papers.
  2. Kenneth A. Froot & Kenneth Rogoff, 1991. "The EMS, the EMU, and the Transition to a Common Currency," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 269-328 National Bureau of Economic Research, Inc.
  3. Mussa, Michael, 1976. " The Exchange Rate, the Balance of Payments and Monetary and Fiscal Policy under a Regime of Controlled Floating," Scandinavian Journal of Economics, Wiley Blackwell, vol. 78(2), pages 229-48.
  4. De Grauwe, Paul, 1996. "How to Fix Conversion Rates at the Start of EMU," CEPR Discussion Papers 1530, C.E.P.R. Discussion Papers.
  5. De Grauwe, Paul & Spaventa, Luigi, 1997. "Setting Conversion Rates for the Third Stage of EMU," CEPR Discussion Papers 1638, C.E.P.R. Discussion Papers.
  6. P. De Grauwe & L. Spaventa, 1997. "Setting conversion rates for the third stage of EMU," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 50(201), pages 131-146.
  7. Kareken, John & Wallace, Neil, 1981. "On the Indeterminacy of Equilibrium Exchange Rates," The Quarterly Journal of Economics, MIT Press, vol. 96(2), pages 207-22, May.
  8. P. De Grauwe & L. Spaventa, 1997. "Setting conversion rates for the third stage of EMU," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 50(201), pages 131-146.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:42:y:1998:i:6:p:975-1007. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.