The International Role of the Euro

Abstract

This paper discusses the factors determining the international use of the euro, the relation of it with the ECB monetary policy and the overall use of the euro in the international monetary system since its introduction. The euro has become the second most important international currency after the dollar and in advance of the yen. Changes in this role could have an impact on the monetary policy strategy of the ECB, notably the interpretation of monetary aggregates and the behaviour of other indicators such as the exchange rate. The ECB strategy is well designed to deal with these effects.

Keywords: international currencies, euro, dollar, yen, monetary policy, monetary aggregates, exchange rate, international monetary system, EMU, European Central Bank

JEL Classification: G15, F02, F33, E52, E58