A Strategy for Launching the Euro
This paper analyzes the constraints European Union law places on the 1 January 1999" choices of irrevocably fixed conversion rates between the Euro and the currencies of EMU" member states. Current EU legislation, notably the Maastricht treaty bilateral currency conversion factors implied by the 1 January 1999 choices equal closing" market exchange rates on 31 December 1998. Given that legal constraint several strategies for choosing the relative prices of EMU member currencies against the Euro. " Unfortunately, most of these have potentially damaging side effects. One approach official Stage 2 offers of contingent Euro forward contracts with value dates at the start of" Stage 3, allows a highly credible preannouncement of the bilateral currency conversion factors" to be set at the start of EMU. That approach assumes, however, that no prospective EMU" members can withdraw between their selection in May 1998 and the start of Stage 3."
|Date of creation:||Mar 1999|
|Date of revision:|
|Publication status:||published as European Economic Review, vol. 42, no. 6, pp. 975-1007, 1998.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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CEPR Discussion Papers
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- John Kareken & Neil Wallace, 1981. "On the Indeterminacy of Equilibrium Exchange Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 96(2), pages 207-222.
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