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The Exchange Rate -a Shock-Absorber or Source of Shocks? A Study of Four Open Economies

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  • Michael Artis
  • Michael Ehrmann

Abstract

The paper provides SVAR estimates for four open economies: the UK, Canada, Sweden and Denmark, making explicit a monetary policy reaction function and taking account of exchange rate targeting practices. The object of the analysis is to examine the idea that an independent money and exchange rate should allow for effective shock-absorption. A polar extreme would be that exchange markets breed their own, and destabilizing, shocks. The paper?s findings vary from one economy to another: monetary union appears easy to recommend for Sweden and Denmark, much less so for Canada and the UK.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Michael Artis & Michael Ehrmann, 2000. "The Exchange Rate -a Shock-Absorber or Source of Shocks? A Study of Four Open Economies," EUI-RSCAS Working Papers 38, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    • Handle: RePEc:erp:euirsc:p0033
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    References listed on IDEAS

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    More about this item

    Keywords

    currency; economic integration; EMU; Euro; European Central Bank; political economy; U.K.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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