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EMU, Exchange Rates and the International Monetary System

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  • Peter B. Kenen

    (Princeton University)

Abstract

This paper asks how EMU will affect foreign-exchange markets,the demands for various key currencies, the behaviour of exchanges rates among them, and policy coordination. The advent of the Ecu as the single currency of the EC may reduce the vehicle role of the dollar in foreign-exchange markets. Yet the share of the Ecu in global reserves may be lower initially than the sum of the shares of the presentEC currencies. The private demand for Ecu, domestic and foreign, may also be smaller initially than the demands for the present EC currencies. By helping to unify EC capital markets, however, advent of the Ecu may raise the flow demand for Ecu-denominated claims, causing the Ecu to appreciate in the early years of EMU. Finally, EMU may not help Europe to speak with one voice in international negotiations and may thus interfere with policy coordination.

Suggested Citation

  • Peter B. Kenen, 1993. "EMU, Exchange Rates and the International Monetary System," Discussion Papers (REL - Recherches Economiques de Louvain) 1993022, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvre:1993022
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    File URL: http://www.jstor.org/stable/40724021
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    Cited by:

    1. Agnès Bénassy & Alexander Italianer & Jean Pisani-Ferry, 1993. "Les implications extérieures de la monnaie unique," Économie et Statistique, Programme National Persée, vol. 262(1), pages 49-62.
    2. Agnès Bénassy-Quéré & Benoît Mojon & Armand-Denis Schor, 1998. "The International Role of the Euro," Working Papers 1998-03, CEPII research center.
    3. Chris Kirrane, 2018. "Implications of EMU for the European Community," Papers 1805.12113, arXiv.org.
    4. Agnès Bénassy-Quéré, 1996. "Potentialities and Opportunities of the Euro as an International Currency," Working Papers 1996-09, CEPII research center.
    5. Lefebvre, Dominique, 1997. "Euro Internationalization," MPRA Paper 89353, University Library of Munich, Germany.
    6. Pierre Faure, 2003. "Monetary and Fiscal Policy Games and Effects of Institutional Differences between the European Union and the Rest of the World," Revue économique, Presses de Sciences-Po, vol. 54(5), pages 937-959.
    7. Kirrane, Chris, 1994. "Implications of EMU for the European Community," MPRA Paper 88998, University Library of Munich, Germany.
    8. Patricia S. Pollard, 2001. "The creation of the Euro and the role of the dollar in international markets," Review, Federal Reserve Bank of St. Louis, vol. 83(May), pages 17-36.
    9. C. Randall Henning, 2006. "The External Policy of the Euro Area: Organizing for Foreign Exchange Intervention," Working Paper Series WP06-4, Peterson Institute for International Economics.
    10. Françoise Le Quéré, 1999. "Les sources de l'internationalisation de l'euro," Revue d'Économie Financière, Programme National Persée, vol. 52(2), pages 31-54.

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