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The EURO, Prudent Coherence?

Author

Listed:
  • Ivo J.M. Arnold

    (Nijenrode University)

  • Casper G. de Vries

    (Erasmus University Rotterdam)

Abstract

A flurry of recent articles has argued on the basis of constructed European widemonetary aggregates that the demand for EURO's will be more stable than thecurrent demand for national currencies. In policy circles this seeminglymoderating effect of monetary integration figures as an additional argument prounion. On the basis of the standard foreign exchange rate model we argue thatonce the uncoordinated country specific money supply system is abolished, thecoherence between local monetary aggregates increases dramatically, leavinglittle room for a free ride on the law of large numbers. The only road towardsstability is prudent monetary policy.

Suggested Citation

  • Ivo J.M. Arnold & Casper G. de Vries, 1998. "The EURO, Prudent Coherence?," Tinbergen Institute Discussion Papers 98-070/2, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:19980070
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    Cited by:

    1. Bernd Hayo, 2000. "The demand for money in Austria," Empirical Economics, Springer, vol. 25(4), pages 581-603.
    2. Arnold, Ivo J. M. & de Vries, Casper G., 2000. "Endogeneity in European money demand," European Journal of Political Economy, Elsevier, vol. 16(4), pages 587-609, November.
    3. Bernd Hayo, 1999. "Estimating A European Demand For Money," Scottish Journal of Political Economy, Scottish Economic Society, vol. 46(3), pages 221-244, August.
    4. Peter Brandner & Helene Schuberth, 1999. "Effizienz und Transparenz der geldpolitischen Strategie des ESZB," WIFO Monatsberichte (monthly reports), WIFO, vol. 72(1), pages 61-73, January.
    5. Vinhas de Souza, Lúcio & Ledrut, Elisabeth, 2002. "Alternative Paths Towards EMU: Lessons from an Expanded Mundell-Fleming Model for the Accession Countries," Kiel Working Papers 1132, Kiel Institute for the World Economy (IfW Kiel).

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