IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/2058.html

EMU and the External Value of the Euro

Author

Listed:
  • Demertzis, Maria
  • Hughes Hallett, Andrew

Abstract

The size and economic relevance of Europe may imply a new role for the EURO in the international financial markets. But will the EURO compete with the $US and the Yen for a place in the basket of international currencies? Will that induce a bipolar or indeed tri-polar system, and with what consequences? Two important uncertainties arise from the fact that the long run trend of the EURO depends on the economic performance of the partner countries as well as on the properties of the new currency. They are: a) the international use of the EURO in trade, as well as its effect on the stability of the foreign exchange markets more generally, and b) the implementation of monetary and fiscal policies: how the new European policy mix will affect the degree of international policy co-ordination and exchange rate management. Much of this uncertainty is due to the fact that some of the effects will work in opposite directions and many will be felt gradually (primarily those that are dependent on private sector expectations), while others will become obvious as soon as the EURO is introduced. In this paper we discuss some of the reasons why the EURO might be strong or weak but more importantly why it may be volatile at least in the initial stages. Finally, we calculate the "synthetic" EURO and show how one EURO is not one ECU, an additional reason why it may prove volatile.

Suggested Citation

  • Demertzis, Maria & Hughes Hallett, Andrew, 1999. "EMU and the External Value of the Euro," CEPR Discussion Papers 2058, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:2058
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2058
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kenen,Peter B., 1995. "Economic and Monetary Union in Europe," Cambridge Books, Cambridge University Press, number 9780521558839.
    2. Cohen, Daniel, 1997. "How Will the Euro behave?," CEPR Discussion Papers 1673, Centre for Economic Policy Research.
    3. Rudi Dornbusch & Carlo Favero & Francesco Giavazzi, 1998. "Immediate challenges for the European Central Bank," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 13(26), pages 16-64.
    4. repec:fth:eecero:1 is not listed on IDEAS
    5. Canzoneri,Matthew B. & Grilli,Vittorio & Masson,Paul R. (ed.), 1992. "Establishing a Central Bank," Cambridge Books, Cambridge University Press, number 9780521420983.
    6. Richard N. Cooper, 1969. "Macroeconomic Policy Adjustment in Interdependent Economies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 83(1), pages 1-24.
    7. Agnès Bénassy-Quéré & Benoît Mojon & Jean Pisani-Ferry, 1997. "The Euro and Exchange Rate Stability," Working Papers 1997-12, CEPII research center.
    8. Kenneth Rogoff, 1998. "Blessing or curse? Foreign and underground demand for euro notes," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 13(26), pages 262-303.
    9. Richard Portes & Hélène Rey, 1998. "The emergence of the euro as an international currency," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 13(26), pages 306-343.
    10. Martin, Philippe, 1998. "The Exchange Rate Policy of the Euro: A Matter of Size?," Journal of the Japanese and International Economies, Elsevier, vol. 12(4), pages 455-482, December.
    11. Woodford, Michael, 1995. "Price-level determinacy without control of a monetary aggregate," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 43(1), pages 1-46, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chinn, Menzie David, 2000. "The empirical determinants of the Euro: Short and long run perspectives," SFB 373 Discussion Papers 2000,43, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robert McCauley, 1999. "The Euro and the Dollar, 1998," Open Economies Review, Springer, vol. 10(1), pages 91-133, February.
    2. Agnès Bénassy-Quéré & Benoît Mojon & Armand-Denis Schor, 1998. "The International Role of the Euro," Working Papers 1998-03, CEPII research center.
    3. McCauley, R.N., 1997. "The Euro and the Dollar," Princeton Essays in International Economics 205, International Economics Section, Departement of Economics Princeton University,.
    4. Carsten Detken & Philipp Hartmann, 2000. "The Euro and International Capital Markets," International Finance, Wiley Blackwell, vol. 3(1), pages 53-94, April.
    5. Françoise Le Quéré, 1999. "Les sources de l'internationalisation de l'euro," Revue d'Économie Financière, Programme National Persée, vol. 52(2), pages 31-54.
    6. Giancarlo Corsetti & Paolo Pesenti, 1999. "Stability, Asymmetry, and Discontinuity: The Launch of European Monetary Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(2), pages 295-372.
    7. Lefebvre, Dominique, 1997. "Euro Internationalization," MPRA Paper 89353, University Library of Munich, Germany.
    8. Agnès Bénassy-Quéré & Benoît Mojon & Jean Pisani-Ferry, 1997. "The Euro and Exchange Rate Stability," Working Papers 1997-12, CEPII research center.
    9. repec:spo:wpmain:info:hdl:2441/2973 is not listed on IDEAS
    10. Jérôme Creel & Henri Sterdyniak, 1998. "À propos de la volatilité de l'euro," Revue de l'OFCE, Programme National Persée, vol. 65(1), pages 199-226.
    11. Jerome Creel & Henri Sterdyniak, 1998. "Discussing Euro Volatility," Documents de Travail de l'OFCE 1998-03, Observatoire Francais des Conjonctures Economiques (OFCE).
    12. Kaikati, Jack G., 1999. "The Euro versus the U.S. dollar: an overview," Journal of World Business, Elsevier, vol. 34(2), pages 171-192, July.
    13. Menguy, Severine, 2007. "The advantages of introducing an exchange rate target within the statutes of the European Central Bank," Journal of Multinational Financial Management, Elsevier, vol. 17(4), pages 304-316, October.
    14. repec:spo:wpecon:info:hdl:2441/2963 is not listed on IDEAS
    15. Dominick Salvatore, 1998. "International Monetary and Financial Arrangements: Present and Future," Open Economies Review, Springer, vol. 9(1), pages 375-416, January.
    16. repec:spo:wpecon:info:hdl:2441/2096 is not listed on IDEAS
    17. Portes, Richard, 1999. "Global Financial Markets and Financial Stability: Europe's Role," CEPR Discussion Papers 2298, Centre for Economic Policy Research.
    18. repec:spo:wpmain:info:hdl:2441/2963 is not listed on IDEAS
    19. Ricci, Luca Antonio & Isard, Peter, 2002. "European monetary union, adjustment, and exchange rate variability," European Economic Review, Elsevier, vol. 46(2), pages 229-251, February.
    20. Jacques Le Cacheux, 1998. "La diffusion internationale de l'euro," Revue de l'OFCE, Programme National Persée, vol. 65(1), pages 227-241.
    21. Fayolle, J. & Micolet, P-E., 1998. "Cycles internationaux et européens: éléments pour une problématique appliquée," Documents de Travail de l'OFCE 1998-01, Observatoire Francais des Conjonctures Economiques (OFCE).
    22. repec:spo:wpmain:info:hdl:2441/2096 is not listed on IDEAS
    23. repec:spo:wpecon:info:hdl:2441/2973 is not listed on IDEAS
    24. Boyer, Robert, 1998. "An essay on the political and institutional deficits of the Euro. The unanticipated fallout of the European Monetary Union," CEPREMAP Working Papers (Couverture Orange) 9813, CEPREMAP.
    25. Juan Pi??eiro Chousa, & Artur Tamazian, & Davit N. Melikyan,, 2008. "MARKET RISK DYNAMICS AND COMPETITIVENESS AFTER THE EURO: Evidence from EMU Members," William Davidson Institute Working Papers Series wp916, William Davidson Institute at the University of Michigan.
    26. Neaime, Simon & Paschakis, John, 2002. "The future of the dollar-euro exchange rate," The North American Journal of Economics and Finance, Elsevier, vol. 13(1), pages 56-71, May.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • G1 - Financial Economics - - General Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2058. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CEPR (email available below). General contact details of provider: https://cepr.org/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.