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Will the Euro be Stable?
Author(s) -
Breedon Francis,
Chui Michael
Publication year - 1998
Publication title -
economic outlook
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.1
H-Index - 8
eISSN - 1468-0319
pISSN - 0140-489X
DOI - 10.1111/1468-0319.00149
Subject(s) - economics , volatility (finance) , monetary economics , exchange rate , empirical evidence , international economics , macroeconomics , keynesian economics , econometrics , philosophy , epistemology
In this article Francis Breedon and Michael Chui look at the impact of EMU on exchange rate volatility. Although theoretical evidence is mixed, their empirical evidence suggests that $/Euro volatility will be significantly higher on average than $/DM volatility has been historically, largely because the ECB will put less weight on the exchange rate in their policy deliberations than the Bundesbank has done. This result suggests that EMU‐outs such as the UK may have to cope with potentially larger exchange rates swings until they make a more formal commitment to EMU.