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Exchange Rate Systems and Macroeconomic Stability

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  • Dellas, Harris
  • Collard, Fabrice

Abstract

We examine macroeconomic stability and the properties of the international transmission of business cycles under three exchange rate systems: a flexible, a unilateral peg and a single currency. The subjects of study are Germany and France. EMU increases output and decreases inflation variability in Germany but it has the opposite effect in France. It induces a strong negative international transmission of country specific supply shocks and amplifies the role of German supply shocks. These two facts may complicate ECB policy-making.

Suggested Citation

  • Dellas, Harris & Collard, Fabrice, 2001. "Exchange Rate Systems and Macroeconomic Stability," CEPR Discussion Papers 2768, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2768
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    More about this item

    Keywords

    Flexible exchange rate; Unilateral exchange rate pegging; Monetary union; International business cycle transmission; Taylor rules;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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