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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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    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. Jarko Fidrmuc, 2004. "The Endogeneity of the Optimum Currency Area Criteria, Intra‐industry Trade, and EMU Enlargement," Contemporary Economic Policy, Western Economic Association International, vol. 22(1), pages 1-12, January.
    4. Kawalec, Stefan & Krzak, Maciej, 2001. "Polityka kursowa i wzrost gospodarczy," Gospodarka Narodowa-The Polish Journal of Economics, Szkoła Główna Handlowa w Warszawie / SGH Warsaw School of Economics, vol. 2001(9), September.
    5. Jarko Fidrmuc, 2004. "The Endogeneity of the Optimum Currency Area Criteria, Intra‐industry Trade, and EMU Enlargement," Contemporary Economic Policy, Western Economic Association International, vol. 22(1), pages 1-12, January.

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    Keywords

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    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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