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EMU, Exchange Rates and the International Monetary System

Published online by Cambridge University Press:  17 August 2016

Peter B. Kenen
Peter B. Kenen*
Affiliation:
Princeton University
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Summary

This paper asks how EMU will affect foreign-exchange markets, the demands for various key currencies, the behaviour of exchanges rates among them, and policy coordination. The advent of the Ecu as the single currency of the EC may reduce the vehicle role of the dollar in foreign-exchange markets. Yet the share of the Ecu in global reserves may be lower initially than the sum of the shares of the present EC currencies. The private demand for Ecu, domestic and foreign, may also be smaller initially than the demands for the present EC currencies. By helping to unify EC capital markets, however, advent of the Ecu may raise the flow demand for Ecu-denominated claims, causing the Ecu to appreciate in the early years of EMU. Finally, EMU may not help Europe to speak with one voice in international negotiations and may thus interfere with policy coordination.

Résumé

Résumé

Cette article s’interroge sur l’impact de TCJEM sur les échanges internationaux, les demandes pour plusieurs devises-clés, les comportements de leurs taux de change et la coordination des politiques. L’avènement de l’Ecu comme monnaie unique des Communautés Européennes peut réduire le rôle du dollar en tant que véhicule du commerce international. Pourtant la part de l’Ecu dans les réserves globales peut être initialement inférieur à la part actuelle de toutes les monnaies des pays des CE réunies. La demande privée pour l’Ecu, qu’elle soit domestique ou extérieure, peut également être initialement inférieure à la somme des demandes actuelles pour les monnaies des pays de CE. Par contre, en contribuant à unifier les marchés des capitaux des pays des CE, l’avènement de l’Ecu peut accroître le flux de demande de créances libellées en Ecu, susceptibles d’entraîner une appréciation de l’Ecu au cours des premières années de UEM. Enfin, IIJEM peut accroître les difficultés de l’Europe à «parler d’une seule voix» dans les négociations internationales, et ainsi interférer dans la coordination des politiques.

Keywords

432431423432431423
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 59 , Issue 1-2: Monetary Integration in Europe , 1993 , pp. 257 - 281
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1993 

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Footnotes

*

This paper was written while the author was a Visiting Scholar at the International Monetary Fund. It draws on a longer study (Kenen, 1992) written while the author held a Houblon-Norman Fellowship at the Bank of England. The author is deeply grateful both institutions for their help and hospitality. The views expressed in this paper are, of course, personal and should not be deemed to represent the views of the International Monetary Fund, the Houblon-Norman Trust, or the Bank of England.

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