Abstract
deprives investors of the opportunity to speculate on expected-rate-of-return differentials. Numerical simulations suggest that the welfare gain from exchange rate stabilization for the average EU country is equivalent to a 0.9 percent rate of return on portfolio wealth.
| Original language | English |
|---|---|
| Pages (from-to) | 309-329 |
| Journal | Empirica: Journal of applied economics and economic policy |
| Volume | 25 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - 1997 |
| Externally published | Yes |
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The attractiveness of the EMU exchange rate stabilization program. / Westerhout, Ed.
In: Empirica: Journal of applied economics and economic policy, Vol. 25, No. 3, 1997, p. 309-329.Research output: Contribution to journal › Article › Scientific › peer-review
TY - JOUR
T1 - The attractiveness of the EMU exchange rate stabilization program
AU - Westerhout, Ed
PY - 1997
Y1 - 1997
N2 - One of the arguments for a monetary union is that it reduces the variability of exchange rates. This paper demonstrates that the welfare gain that EU countries can expect to gain from the move to a single currency is moderate. The gains from exchange rate stabilization are limited by imports of foreign consumption goods and borrowing by governments. Furthermore, exchange rate stabilization may imply a welfare loss as the removal of non-zero exchange rate expectationsdeprives investors of the opportunity to speculate on expected-rate-of-return differentials. Numerical simulations suggest that the welfare gain from exchange rate stabilization for the average EU country is equivalent to a 0.9 percent rate of return on portfolio wealth.
AB - One of the arguments for a monetary union is that it reduces the variability of exchange rates. This paper demonstrates that the welfare gain that EU countries can expect to gain from the move to a single currency is moderate. The gains from exchange rate stabilization are limited by imports of foreign consumption goods and borrowing by governments. Furthermore, exchange rate stabilization may imply a welfare loss as the removal of non-zero exchange rate expectationsdeprives investors of the opportunity to speculate on expected-rate-of-return differentials. Numerical simulations suggest that the welfare gain from exchange rate stabilization for the average EU country is equivalent to a 0.9 percent rate of return on portfolio wealth.
U2 - 10.1023/A:1006923818277
DO - 10.1023/A:1006923818277
M3 - Article
VL - 25
SP - 309
EP - 329
JO - Empirica: Journal of applied economics and economic policy
JF - Empirica: Journal of applied economics and economic policy
SN - 0340-8744
IS - 3
ER -