Emu and Transatlantic Exchange Rate Stability

41 Pages Posted: 13 Jan 2000

See all articles by Benoit Mojon

Benoit Mojon

Banque de France

Agnès Bénassy-Quéré

Paris School of Economics (University Paris 1)

Abstract

The impact of EMU on the transatlantic exchange rate stability raises the more general question of whether the exchange rate is a useful adjustment instrument or source of instability. We estimate a simple, three-country model for the United States, Germany and France, over the 1972-1995 period. Then we compare EMU, the ERM and a floating regime through stochastic simulations. We show that EMU could reduce the variability of the transatlantic exchange rate compared both to the ERM and to a floating regime, even if the removal of shocks to the intra-European risk premium is not attributed to the regime shift.

JEL Classification: E52, F02, F31, F33

Suggested Citation

Mojon, Benoit and Benassy-Quere, Agnes, Emu and Transatlantic Exchange Rate Stability. Available at SSRN: https://ssrn.com/abstract=186649 or http://dx.doi.org/10.2139/ssrn.186649

Benoit Mojon (Contact Author)

Banque de France ( email )

Paris
France

Agnes Benassy-Quere

Paris School of Economics (University Paris 1) ( email )

106-112 boulevard de l'Hopital
Paris, F-75013
France
+33 1 44 07 82 19 (Phone)

HOME PAGE: http://www.parisschoolofeconomics.com/benassy-quere-agnes/agnesb.html