Characteristics of the Euro, the Demand for Reserves, and Policy Coordination Under EMU

May 1, 1997

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Format: Chicago

Paul R Masson, and Bart Turtelboom. Characteristics of the Euro, the Demand for Reserves, and Policy Coordination Under EMU, (USA: International Monetary Fund, 1997) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The success of European Economic and Monetary Union (EMU) will depend on the stability of the euro. The monetary policy framework is yet to be decided, but is likely to involve either money or inflation targeting. Stochastic simulations compare the outcomes for major macroeconomic and financial variables pre- and post-EMU under both policy rules, as well as under an inflation targeting rule that includes output. Implications for the euro as a reserve currency are examined in the light of the expected returns and covariances among reserve currencies. The role of the exchange rate as an indicator and incentives for policy coordination with other major countries are also discussed.

Subject: Currencies, Economic integration, Exchange rates, Foreign exchange, Inflation, Inflation targeting, Monetary policy, Monetary unions, Money, Prices

Keywords: Currencies, Currency, Currency composition, Currency denomination, Deutsche mark, Dollar, Dollar holding, EMU simulation, EU country, EU currency, Euro, Europe, Exchange rates, Foreign exchange, Global, Inflation, Inflation targeting, Monetary unions, Pound sterling, Transmission mechanism, WP, Yen share

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1997/058
Stock No:

WPIEA0581997
ISBN:

9781451847826
ISSN:

1018-5941

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