A Strategy for Launching the Euro

52 Pages Posted: 7 Jul 2000 Last revised: 7 Oct 2010

See all articles by Maurice Obstfeld

Maurice Obstfeld

University of California, Berkeley; Peterson Institute for International Economics; National Bureau of Economic Research; Centre for Economic Policy Research

Date Written: March 1999

Abstract

This paper analyzes the constraints European Union law places on the 1 January 1999" choices of irrevocably fixed conversion rates between the Euro and the currencies of EMU" member states. Current EU legislation, notably the Maastricht treaty bilateral currency conversion factors implied by the 1 January 1999 choices equal closing" market exchange rates on 31 December 1998. Given that legal constraint several strategies for choosing the relative prices of EMU member currencies against the Euro. " Unfortunately, most of these have potentially damaging side effects. One approach official Stage 2 offers of contingent Euro forward contracts with value dates at the start of" Stage 3, allows a highly credible preannouncement of the bilateral currency conversion factors" to be set at the start of EMU. That approach assumes, however, that no prospective EMU" members can withdraw between their selection in May 1998 and the start of Stage 3."

Suggested Citation

Obstfeld, Maurice, A Strategy for Launching the Euro (March 1999). NBER Working Paper No. w6233. Available at SSRN: https://ssrn.com/abstract=225991

Maurice Obstfeld (Contact Author)

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National Bureau of Economic Research ( email )

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Centre for Economic Policy Research ( email )

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