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Economic Stability and Choice of Exchange Rate Regimes

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  • Kaji, Sahoko

    (Asian Development Bank Institute)

Abstract

This paper emphasizes the importance of Europe’s structural problems and governance as the cause of the current euro area crisis. The euro may have led to bubbles, but member economies were not free of trouble before the euro. Many members were losing competitiveness and in need of removing structural rigidities. If anything, the euro was expected to encourage structural reform, by taking away the easy choice of monetary and fiscal expansion. We first discuss the relationship between the single currency and economic stability in Europe. We confirm the asymmetries that remained after the introduction of the euro and then discuss the governance overhaul taking place in Europe today. This overhaul was something that should have been done before introducing the euro, and its advancement may be the silver lining of this crisis. Finally, we touch upon the implications for Asia and Japan, from the point of view of the choice of exchange rate regime as a method to advance necessary reforms.

Suggested Citation

  • Kaji, Sahoko, 2013. "Economic Stability and Choice of Exchange Rate Regimes," ADBI Working Papers 408, Asian Development Bank Institute.
    • Handle: RePEc:ris:adbiwp:0408
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    File URL: http://www.adbi.org/files/2013.02.19.wp408.economic.stability.exchange.rate.regimes.pdf
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    References listed on IDEAS

    as
    1. Kaji, Sahoko, 1998. "Successful Structural Reforms after EMU," Journal of the Japanese and International Economies, Elsevier, vol. 12(4), pages 507-534, December.
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      More about this item

      Keywords

      single currency; europe; euro area crisis; economic stability; exchange rate regimes;
      All these keywords.

      JEL classification:

      • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
      • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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