The Euro and the International Financial System

London Business School Economics Discussion Paper No. DP 2001/4

25 Pages Posted: 7 Nov 2001

See all articles by Richard Portes

Richard Portes

London Business School - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2001

Abstract

This paper analyses the issues raised by EMU for the relationships between the euro area and the international financial system. The depreciation of the euro exchange rate since the beginning of EMU has attracted most attention. The paper argues that none of the conventional explanations is supported by theory or the data and that a substantial appreciation will be required to bring the rate to a sustainable long-run equilibrium. It discusses exchange-rate intervention and suggests that the authorities should take a more active policy stance. The paper assesses the role of the euro as an international currency and the underlying developments in the capital markets and foreign exchange markets. It concludes with discussion of policies towards the international role of the euro, in areas such as: data needs; financial market developments; euroisation; EMU and the international financial architecture; and the role of the Euro Group of finance ministers.

Keywords: EMU, euro, exchange rates, international currencies, euroisation

JEL Classification: F3, F4, G1

Suggested Citation

Portes, Richard, The Euro and the International Financial System (June 2001). London Business School Economics Discussion Paper No. DP 2001/4, Available at SSRN: https://ssrn.com/abstract=289332 or http://dx.doi.org/10.2139/ssrn.289332

Richard Portes (Contact Author)

London Business School - Department of Economics ( email )

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HOME PAGE: http://faculty.london.edu/rportes/

Centre for Economic Policy Research (CEPR)

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United Kingdom

National Bureau of Economic Research (NBER)

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