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How to Fix Conversion Rates at the Start of EMU

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  • De Grauwe, Paul

Abstract

This paper analyses several procedures for fixing conversion rates at the start of EMU. One consists of announcing a fixed conversion rate; a second (proposed by Lalmfalussy) would announce that the conversion rate will be an average of past market exchange rates; and a third involves announcing that the market exchange rate observed just prior to entry will be the conversion rate. The paper evaluates these different procedures and concludes that the Lamfalussy rule is unattractive compared to the two other alternatives.

Suggested Citation

  • De Grauwe, Paul, 1996. "How to Fix Conversion Rates at the Start of EMU," CEPR Discussion Papers 1530, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1530
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    Citations

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    Cited by:

    1. Obstfeld, Maurice, 1998. "A strategy for launching the Euro," European Economic Review, Elsevier, vol. 42(6), pages 975-1007, June.
    2. Paul De Grauwe & Luigi Spaventa, 2014. "Setting Conversion Rates for the Third Stage of EMU," World Scientific Book Chapters, in: Exchange Rates and Global Financial Policies, chapter 9, pages 253-268, World Scientific Publishing Co. Pte. Ltd..
    3. Wagenvoort, Rien & de Nicola, Carlo & Kappeler, Andreas, 2010. "Infrastructure finance in Europe: Composition, evolution and crisis impact," EIB Papers 1/2010, European Investment Bank, Economics Department.
    4. Wilfling Bernd, 2003. "Interest Rate Volatility Prior to Monetary Union under Alternative Pre-Switch Regimes," German Economic Review, De Gruyter, vol. 4(4), pages 433-457, December.
    5. Wilfling, Bernd, 2009. "Volatility regime-switching in European exchange rates prior to monetary unification," Journal of International Money and Finance, Elsevier, vol. 28(2), pages 240-270, March.
    6. Bernd Wilfling, 2003. "Interest Rate Volatility Prior to Monetary Union under Alternative Pre-Switch Regimes," German Economic Review, Verein für Socialpolitik, vol. 4, pages 433-457, November.
    7. Jean-Sébastien Pentecôte & Marc-Alexandre Sénégas, 2003. "Comment fixer les cours de change?. Annonces et correspondances maastrichtiennes," Recherches économiques de Louvain, De Boeck Université, vol. 69(1), pages 39-71.
    8. Katsimi, Margarita, 2008. "Exchange rate strategies towards the euro-zone for new EU member states with currency boards," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1043-1063, September.
    9. Estache, Antonio, 2010. "Infrastructure finance in developing countries: An overview," EIB Papers 8/2010, European Investment Bank, Economics Department.
    10. Engel, Eduardo & Fischer, Ronald & Galetovic, Alexander, 2010. "The economics of infrastructure finance: Public-Private Partnerships versus public provision," EIB Papers 2/2010, European Investment Bank, Economics Department.
    11. Mark Trede & Bernd Wilfling, 2007. "Estimating exchange rate dynamics with diffusion processes: an application to Greek EMU data," Empirical Economics, Springer, vol. 33(1), pages 23-39, July.
    12. Stewart, James, 2010. "The UK National Infrastructure Plan 2010," EIB Papers 6/2010, European Investment Bank, Economics Department.
    13. Bitsch, Florian & Buchner, Axel & Kaserer, Christoph, 2010. "Risk, return and cash flow characteristics of infrastructure fund investments," EIB Papers 4/2010, European Investment Bank, Economics Department.
    14. David Sondermann & Mark Trede & Bernd Wilfling, 2011. "Estimating the degree of interventionist policies in the run-up to EMU," Applied Economics, Taylor & Francis Journals, vol. 43(2), pages 207-218.
    15. Fay, Marianne & Iimi, Atsushi & Perrissin-Fabert, Baptiste, 2010. "Financing greener and climate-resilient infrastructure in developing countries - challenges and opportunities," EIB Papers 7/2010, European Investment Bank, Economics Department.
    16. A. Frachot, 1997. "How To Stabilize Financial Markets Before EMU ?," International Finance 9707004, University Library of Munich, Germany.
    17. Bronka Rzepkowski, 1997. "Impact de l'annonce de la modalité de fixation des taux de conversion des monnaies européennes," Économie et Prévision, Programme National Persée, vol. 128(2), pages 145-159.
    18. Helm, Dieter, 2010. "Infrastructure and infrastructure finance: The role of the government and the private sector in the current world," EIB Papers 5/2010, European Investment Bank, Economics Department.
    19. 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.
    20. Uctum, Merih & Deusy-Fournier, Pierre, 1998. "Le dollar et l’euro : la primauté monétaire de l’Europe a-t-elle une place?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 74(4), pages 669-694, décembre.
    21. De Grauwe, Paul & Dewachter, Hans & Veestraeten, Dirk, 1999. "Price dynamics under stochastic process switching: some extensions and an application to EMU1," Journal of International Money and Finance, Elsevier, vol. 18(2), pages 195-224, February.
    22. Inderst, Georg, 2010. "Infrastructure as an asset class," EIB Papers 3/2010, European Investment Bank, Economics Department.

    More about this item

    Keywords

    Exchange Rate; Maastricht Treaty; Monetary Integration;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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