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The Euro and the International Financial System

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  • Portes, Richard

Abstract

This Paper analyses the issues raised by EMU for the relationships between the Euro area and the international financial system. The depreciation of the Euro exchange rate since the beginning of EMU has attracted most attention. The Paper argues that theory and the data support none of the conventional explanations and that a substantial appreciation will be required to bring the rate to a sustainable long-run equilibrium. It discusses exchange-rate intervention and suggests that the authorities should take a more active policy stance. The Paper assesses the role of the Euro as an international currency and the underlying developments in the capital markets and foreign exchange markets. It concludes with discussion of policies towards the international role of the Euro, in areas such as: data needs; financial market developments; euroisation; EMU and the international financial architecture; and the role of the Euro Group of finance ministers.

Suggested Citation

  • Portes, Richard, 2001. "The Euro and the International Financial System," CEPR Discussion Papers 2955, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2955
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    References listed on IDEAS

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    1. Benjamín J Cohen, 2000. "Life at the Top: International Currencies in the 21st Century," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 37(110), pages 9-34.
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    6. Portes, Richard, 1999. "Global Financial Markets and Financial Stability: Europe's Role," CEPR Discussion Papers 2298, C.E.P.R. Discussion Papers.
    7. Hartmann,Philipp, 2007. "Currency Competition and Foreign Exchange Markets," Cambridge Books, Cambridge University Press, number 9780521046930.
    8. Alogoskoufis, George & Portes, Richard, 1990. "International Costs and Benefits from EMU," CEPR Discussion Papers 424, C.E.P.R. Discussion Papers.
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    10. Paul R. Krugman, 1984. "The International Role of the Dollar: Theory and Prospect," NBER Chapters,in: Exchange Rate Theory and Practice, pages 261-278 National Bureau of Economic Research, Inc.
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    17. Kevin Nixon & Richard Portes & Jean-Pierre Danthine, 2013. "Policy Panel," RBA Annual Conference Volume,in: Alexandra Heath & Matthew Lilley & Mark Manning (ed.), Liquidity and Funding Markets Reserve Bank of Australia.
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    Citations

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    Cited by:

    1. Koedijk, Kees G. & Tims, Ben & van Dijk, Mathijs A., 2004. "Purchasing power parity and the euro area," Journal of International Money and Finance, Elsevier, vol. 23(7-8), pages 1081-1107.
    2. Robert McCauley, 1999. "The Euro and the Dollar, 1998," Open Economies Review, Springer, vol. 10(1), pages 91-133, February.
    3. Fidrmuc, Jarko, 2001. "The endogeneity of optimum currency area criteria, intraindustry trade and EMU enlargement," BOFIT Discussion Papers 8/2001, Bank of Finland, Institute for Economies in Transition.

    More about this item

    Keywords

    EMU; euro; euroisation; exchange rates; international currencies;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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