Working Paper: CEPR ID: DP1638
Authors: Paul De Grauwe; Luigi Spaventa
Abstract: This paper analyses the constraints on the choice of the conversion rates resulting from the fact that the external value of the Ecu cannot be changed at the start of the third stage of EMU and that one Ecu must be converted into one Euro. These constraints force the authorities to accept the market rates of 31 December 1998 when setting the conversion rates. We propose that the participants should agree on a set of bilateral conversion rates in advance and that they should steer market rates towards these agreed upon bilateral conversion rates.
Keywords: monetary integration; Maastricht Treaty; exchange rate; EMU
JEL Codes: F33; F36; F42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| treaty constraints (F55) | necessity for market alignment (D40) |
| credible commitments by authorities (D70) | market behavior (D40) |
| market behavior (D40) | convergence of market rates to agreed levels (E43) |
| credible commitments by authorities (D70) | convergence of market rates to agreed levels (E43) |