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Setting conversion rates for the third stage of EMU

Author

Listed:
  • P. DE GRAUWE

    (Katholieke Universiteit Leuven)

  • L. SPAVENTA

    (Universita' degli Studi di Roma "La Sapienza")

Abstract

The work examines how the irrevocably fixed conversion rates for the currencies of countries participating in the EMU can be set. The authors recall the few provisions delineated in the Maastricht Treaty before examining the wide set of options available. If there are currencies in the ECU basket that do not participate to the single currency, setting conversion rates becomes more complicated. Moreover, the Lamfalussy rule for defining rates comports undesirable consequences. The authors conclude by proposing a multi-stage solution that is compatible with the recent Council regulation on the legal framework: announcement that the euro conversion rate will be set equal to the ECU market rate on the last day and a parallel agreement on the desired structure of bilateral rates of the inside countries.

Suggested Citation

  • 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.
    • Handle: RePEc:psl:bnlqrr:1997:21
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    References listed on IDEAS

    as
    1. Kenen,Peter B., 1995. "Economic and Monetary Union in Europe," Cambridge Books, Cambridge University Press, number 9780521558839.
    2. David Folkerts-Landau & Peter M. Garber, 1995. "Determining the Value of a Financial Unit of Account Based on Composite Currencies: The Case of the Private ECU," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 134-157, March.
    3. De Grauwe, Paul, 1996. "How to Fix Conversion Rates at the Start of EMU," CEPR Discussion Papers 1530, Centre for Economic Policy Research.
    4. Obstfeld, Maurice, 1998. "A strategy for launching the Euro," European Economic Review, Elsevier, vol. 42(6), pages 975-1007, June.
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    Cited by:

    1. Heikki Oksanen, 2019. "Reforming the Euro Pragmatically: Towards Sustainable Fiscal Policy and a Revamped Eurosystem," CESifo Working Paper Series 7912, CESifo.
    2. Maurice Obstfeld, 1997. "Europe's Gamble," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 241-317.
    3. Obstfeld, Maurice, 1998. "A strategy for launching the Euro," European Economic Review, Elsevier, vol. 42(6), pages 975-1007, June.
    4. Syllignakis, Manolis N. & Kouretas, Georgios P., 2011. "Markov-switching regimes and the monetary model of exchange rate determination: Evidence from the Central and Eastern European markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(5), pages 707-723.
    5. Serge Rey, 2001. "Les taux de change bilatéraux adoptés pour l’entrée dans l’euro sont-ils des taux d’équilibre?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 77(1), pages 75-112.
    6. Robert P. Flood & Peter M. Garber, 2000. "Is Launching the Euro Unstable in the Endgame?," NBER Chapters, in: Currency Crises, pages 163-177, National Bureau of Economic Research, Inc.
    7. Alesina, Alberto Francesco, 1997. "Comments on 'Europe's Gamble' by M. Obstfeld," Scholarly Articles 12553725, Harvard University Department of Economics.
    8. Serge Rey, 2001. "Les taux de change bilatéraux adoptés pour l’entrée dans l’Euro sont-ils des taux d’équilibre? Une tentative de réponse à l’aide de la parité des pouvoirs d’achat et de la parité des coûts," Post-Print hal-01885323, HAL.

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    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F15 - International Economics - - Trade - - - Economic Integration

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