Category Archives: euro

What’s “Hot” and What’s Not, in International Money

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The field of International Monetary Economics is not without its own cycles and fads.

In a speech at the European Central Bank over the summer, “On Global Currencies,” I identified eight concepts that I saw as having recently “peaked” and eight more that I saw as newly rising in relevance. Those that I viewed as losing traction were: the G-7, global savings glut, corners hypothesis, proliferating currency unions, inflation targeting (narrowly defined), exorbitant privilege, Bretton Woods II, and currency manipulation. Those that I saw as receiving increased emphasis now and in the future were: the G-20, the IMF, SDR, credit cycle, reserves, intermediate exchange rate regimes, commodity currencies, and multiple international currency system. read more

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The Euro at Ten: Why Do Effects on Trade Among Members Fall Short of Historical Estimates in Smaller Monetary Unions?

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By roughly the five-year mark after the launch of the euro in 1999, enough data had accumulated to allow an analysis of the early effects of the euro on European trade patterns. Studies include Micco, Ordoñez and Stein (2003), Bun and Klaassen (2002), Flam and Nordström (2006), Berger and Nitsch (2005), De Nardis and Vicarelli (2003, 2008), and Chintrakarn (2008). The general finding was that bilateral trade among euro members had indeed increased significantly, but that the effect was far less than the one that had earlier been estimated by Rose and others on the larger data set of smaller countries. Overall, the central tendency of these estimates seems to be a trade effect in the first few years on the order of 10-15%. None came anywhere near the tripling estimates of Rose (2000), or the doubling estimates (in a time series context) of Glick and Rose (2002). read more

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The Euro at Ten: Time to Assess

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January 1, 2009, is the tenth birthday of the euro.  On this occasion, everyone has been taking stock.   The record of the euro shows both pluses and minuses. Looking back, the euro has in many ways been more successful than predicted by the skeptics — many of them American economists.  (The Europeans love to quote Martin Feldstein as having predicted that EMU could lead to civil war.)  The historic transition to a monetary union among 11 countries in 1999 went smoothly; the euro instantly became the world’s number two international currency; and the officials of the European Central Bank (ECB) have from the beginning worked as citizens of Europe rather than as representatives of home constituencies.  After a rocky start, the euro has achieved a strong value; the ECB has achieved a strong reputation (the tradition of the Bundesbank has not been diluted as feared); and new members to the East have achieved membership in the club.  Slovakia becomes the 16th country to join, on January 1. read more

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