The contribution of the ECU to exchange-rate stability: a further comment

Authors

  • F. FORNARI

DOI:

https://doi.org/10.13133/2037-3643/11123

Keywords:

ECU, exchange rate stability

Abstract

Following recent articles by Jager and de Jong on the one hand, and Sarcinelli on the other, the present work offers additional analysis on the topic of the ECU and exchange-rate stability.  The author shows that the effect of the ECU on exchange-rate stability mainly depends on the presence of arbitrage activity, i.e. the flows of national currencies which the ECU market gives rise to in order to counterbalance an excess demand for Ecus on the Euromarket. When arbitrage is introduced into the analysis, the relationship between the dollar and mark and pound gets worse (so creating instability) whereas the contribution of the ECU to European currencies’ stability remains positive, though reduced.


JEL: F15, F36, E42

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Published

2013-11-23

How to Cite

FORNARI, F. (2013). The contribution of the ECU to exchange-rate stability: a further comment. PSL Quarterly Review, 42(171). https://doi.org/10.13133/2037-3643/11123

Issue

Vol. 42 No. 171 (1989)

Section

Editorial

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