One Money, Many Countries
Monitoring the European Central Bank No. 2
Author(s): Carlo A. Favero, Xavier Freixas, Torsten Persson, Charles Wyplosz
Publication Date: 25 Feb 2000
ISBN: 1 898128 43 X
In the main Report, One Money, Many Countries, the MECB team conclude that the ECB had had a successful first year, and displayed more flexibility than expected regarding asymmetries within the euro-zone. In the 2000 Update the authors discuss the recent weakening of the euro. The ECB has raised interest rates on three occasions since the fall and yet the euro has moved steadily downwards. In line with the markets, and most observers, the ECB has repeatedly stated its view that the euro is abnormally weak and 'has a potential for appreciation'. The Update examines the 'implausible' explanations for the falling euro as well as those better grounded in observable facts.