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Reprint of: The euro and the dollar 6 years after creation

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  • Mussa, Michael

Abstract

In the six years since the advent of the euro, short-term exchange rate volatility against the U.S. dollar is unchanged from that of predecessor currencies. The wide down/up swing of the euro/dollar exchange over six years is no greater than that seen in earlier periods, especially 1980–1987. Part of this wide swing is plausibly explained by movements in economic fundamentals and was desirable; but the swing was too wide and somewhat hampered appropriate macroeconomic policies. The euro/dollar exchange rate is not now clearly undervalued or overvalued. Its further course should generally be left to market forces while policy attention focuses on other key adjustments needed to reduce external payments imbalances to more sustainable levels.

Suggested Citation

  • Mussa, Michael, 2012. "Reprint of: The euro and the dollar 6 years after creation," Journal of Policy Modeling, Elsevier, vol. 34(4), pages 585-593.
  • Handle: RePEc:eee:jpolmo:v:34:y:2012:i:4:p:585-593
    DOI: 10.1016/j.jpolmod.2012.05.015
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