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

Author/Editor:

Paul R Masson ; Bart Turtelboom

Publication Date:

May 1, 1997

Electronic Access:

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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.

Series:

Working Paper No. 1997/058

Subject:

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

English

Publication Date:

May 1, 1997

ISBN/ISSN:

9781451847826/1018-5941

Stock No:

WPIEA0581997

Pages:

37

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