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The Euro as a Monetary Anchor in the CEECs

  • Agnès Bénassy-Quéré

    ()

  • Amina Lahrèche-Révil

We study whether Central and Eastern European Countries (CEECs) have an incentive to use the euro as a monetary anchor. Adapting a cross-section estimation method initiated by Bayoumi and Eichengreen, we show that, compared to an optimum currency area standard, the CEECs have paid too much attention to the USD in the past and should prefer the euro to the dollar as a nominal anchor. Through a theoretical model that takes external constraints into account, we then show that the CEECs should also have an incentive to stabilize their currencies in real terms against a basket where the euro would be prominent. Copyright Kluwer Academic Publishers 2000

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File URL: http://hdl.handle.net/10.1023/A:1008331008940
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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 11 (2000)
Issue (Month): 4 (October)
Pages: 303-321

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Handle: RePEc:kap:openec:v:11:y:2000:i:4:p:303-321
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  1. Paul R. Masson, 1999. "Monetary and Exchange Rate Policy of Transition Economies of Central and Eastern Europe after the Launch of EMU," IMF Policy Discussion Papers 99/5, International Monetary Fund.
  2. Alogoskoufis, G. & Portes, R. & Rey, H., 1997. "The Emergence of the Euro as an International Currency," DELTA Working Papers 97-28, DELTA (Ecole normale supérieure).
  3. Grubel, Herbert G & Lloyd, P J, 1971. "The Empirical Measurement of Intra- Industry Trade," The Economic Record, The Economic Society of Australia, vol. 47(120), pages 494-517, December.
  4. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17.
  5. Philipp Hartmann, 1996. "The Future of the Euro as an International Currency: a Transactions Perspective," FMG Special Papers sp91, Financial Markets Group.
  6. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-25, July.
  7. Helmut Wagner, 1998. "Central Banking in Transition Countries," IMF Working Papers 98/126, International Monetary Fund.
  8. László Halpern & Charles Wyplosz, 1997. "Equilibrium Exchange Rates in Transition Economies," IMF Staff Papers, Palgrave Macmillan, vol. 44(4), pages 430-461, December.
  9. Garry J. Schinasi & Alessandro Prati, 1997. "European Monetary Union and International Capital Markets; Structural Implications and Risks," IMF Working Papers 97/62, International Monetary Fund.
  10. Bayoumi, Tamim & Eichengreen, Barry, 1996. "Operationalizing the Theory of Optimum Currency Areas," CEPR Discussion Papers 1484, C.E.P.R. Discussion Papers.
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