Wechselkursdynamik im Vorfeld einer Währungsunion / Exchange Rate Dynamics Prior to Monetary Union

Using a monetary exchange rate model with flexible prices this paper analyzes the exchange rate dynamics of a credible, time-contingent transition from flexible to fixed rates. Such a switch of exchange rate regime can be applied to alternative realistic events. First, the regime switch can be regarded as a first approximative model for the European Monetary Union subject to the Maastricht timetable. A second application arises from the decision of the monetary authorities to peg the (presently floating) domestic currency to a curreny basket or a single foreign currency at a given date. With respect to Stage 3 of the EMU, three different methods of how to fix the final conversion rates are at the centre of the actual political debate: the rule of a fixed conversion rate, the “average”-rule and the “market”-rule. The alternative rules generate different exchange rate paths which will be derived formally. By this, typical features, e.g. exchange rate jumps and effects on the variance, can be analyzed analytically and compared to each other. It is shown that the first rule provides the most “stable” exchange rate behaviour during the interim period.