DP1638 Setting Conversion Rates for the Third Stage of EMU

Author(s): Paul De Grauwe, Luigi Spaventa
Publication Date: April 1997
Keyword(s): Exchange Rate, Maastricht Treaty, Monetary Integration
JEL(s): F33, F36, F42
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1638

This paper analyses the constraints on the choice of the conversion rates resulting from the fact that the external value of the Ecu cannot be changed at the start of the third stage of EMU and that one Ecu must be converted into one Euro. These constraints force the authorities to accept the market rates of 31 December 1998 when setting the conversion rates. We propose that the participants should agree on a set of bilateral conversion rates in advance and that they should steer market rates towards these agreed upon bilateral conversion rates.