Non-stationary Real Exchange Rates of Tradable and Non-tradable Goods in the European Monetary Union

2021 ◽  
Author(s):  
Rainer Maurer
Keyword(s):  
Exchange Rates ◽  
Monetary Union ◽  
European Monetary Union ◽  
Real Exchange Rates ◽  
European Monetary ◽  
Tradable Goods

The Time Series Properties of the Real Exchange Rates Between the Member States of the European Monetary Union

2019 ◽  
Vol 52 (2) ◽  
pp. 149-171
Author(s):  
Rainer Maurer
Keyword(s):  
Time Series ◽  
Exchange Rates ◽  
Random Walks ◽  
Monetary Union ◽  
European Monetary Union ◽  
Real Exchange Rates ◽  
Jel Classification ◽  
European Monetary ◽  
Member States ◽  
The Real

Abstract The article “The Time Series Properties of the Real Exchange Rates Between the Member States of the European Monetary Union” analyses the time series behavior of the components of the real exchange rates between the founding member states of the EMU before and after the start of the EMU. Various panel and univariate country-specific tests show that the levels of these components are typically random walks. The resulting real exchange rates are also random walks and their components are not cointegrated. It is argued that these results question the operability of the EMU under the current policy regime in the long-run. One possibility to deal with this problem could be the suspension of the principle of a “single monetary policy”. Die Zeitreiheneigenschaften der realen Wechselkurse der Mitgliedsländer der Europäischen Währungsunion Zusammenfassung Der Artikel „Die Zeitreiheneigenschaften der realen Wechselkurse der Mitgliedsländer der Europäischen Währungsunion“ untersucht das Zeitreihenverhalten der Komponenten der realen Wechselkurse zwischen den Gründerstaaten der EWU vor und nach dem Beginn der EWU. Verschiedene Panel- und univariate länderspezifische Test zeigen, dass die Niveaus dieser Komponenten typischerweise Zufallspfaden folgen. Die resultierenden realen Wechselkurse folgen ebenfalls Zufallspfaden und ihre Komponenten sind nicht kointegriert. Diese Ergebnisse, so schließt der Artikel, stellen die langfristige Funktionsfähigkeit der EWU unter dem gegenwärtigen geldpolitischen Regime in Frage. Eine Möglichkeit, dieses Problem zu adressieren, könnte in der Preisgabe des Prinzips der einheitlichen Geldpolitik bestehen. JEL Classification: E50, E31, C12

Three Leaps in the Dark, 1950–1982

2018 ◽  
Author(s):  
Ashoka Mody
Keyword(s):  
Exchange Rates ◽  
Monetary Union ◽  
European Monetary Union ◽  
Economic Problem ◽  
European Monetary ◽  
Economic Problems ◽  
Treaty Of Rome ◽  
Post War ◽  
Practical Sense

This chapter describes the evolution of Europe's monetary union as a French initiative motivated by goal of achieving monetary and economic parity with Germany. The Schuman Declaration in 1950 brought European nations together in a spirit of reconciliation and laid the preparatory basis for post-War Europe. In 1957, the Treaty of Rome enabled the flowering of the European community—which, by the mid-1960s, had completed its primary task of establishing an institutional framework for cooperative coexistence and, by opening trade borders, had enhanced the material capabilities of the nation state. However, the European monetary union project in 1969 resulted in severe economic problems. Forcing one monetary policy on divergent nations made no logical or practical sense. Thus, repeated efforts to fix exchange rates predictably failed. Ultimately, the pursuit of monetary union created great risks and did little for Europe's real economic problem of generating long-term growth and reducing unemployment.

The Effect of Membership in the European Monetary Union on Trade Between Member Countries (An Empirical Study)

2006 ◽  
Author(s):  
Ihor Soroka
Keyword(s):  
Monetary Union ◽  
European Monetary Union ◽  
Bilateral Trade ◽  
Trade Agreement ◽  
Monetary Integration ◽  
European Monetary ◽  
Trade Relations ◽  
Euro Adoption ◽  
Short Period ◽  
Short Run

The question of whether or not to adopt the euro is a very important one, not only for the 13 European Union members that do not share the same currency, but also for future EU candidates. Current literature on the effect of the euro on trade is scarce since the European Monetary Union (EMU) was officially created in 1999, and up until recently there has not been enough data to analyze this issue. This paper aims to estimate the effect of the euro on trade between member countries using the standard gravity model of trade. Using data from current 25 EU members over the period from 1997 to 2004, I show that higher trade volumes between EMU members cannot be attributed to the adoption of the euro. I find evidence that the euro adoption has had a short-run effect on bilateral trade and that this effect is eliminated over a short period of time. My findings suggest that members of the EMU trade on average from 8.8% to 47% more compared to non-members depending on the type of regression used, while members of the Free Trade Agreement trade 61.3% more. The effect of the euro on trade is eliminated as soon as I control for country-pair specific effects that include the FTA effect as well as history of trade relations between two countries. I conclude that the adoption of the euro should be seen as a final step in the European economic and monetary integration for countries that already benefit from relatively high volumes of bilateral trade. Full text availale at: https://doi.org/10.22215/rera.v2i1.166

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