This paper reconsiders the determinants of the exchange rate by studying the historical episode after the fall of the Iron Curtain. Testing a modified portfolio balance model, we attribute the strength of the deutschmark in the early nineties and the puzzling decline of the euro during its...

The creation of the euro and the European Central Bank is a remarkable and unprecedented event in economic and political history: creating a supranational central bank and leaving eleven countries without national currencies of their own. The experience of the first year confirms that one size...

This paper explores the implications of the European single currency within a simple sticky price intertemporal model. The main issue we focus on is how the euro may alter the responsiveness of consumer prices to exchange rate changes. Our central conjectures is that the acceptance of the euro...

This paper analyzes the constraints European Union law places on the 1 January 1999" choices of irrevocably fixed conversion rates between the Euro and the currencies of EMU" member states. Current EU legislation, notably the Maastricht treaty bilateral currency conversion factors implied by the...

Although recent research shows that the euro has spurred cross-border financial integration, the exact mechanisms remain unknown. We investigate the underlying channels of the euro's effect on financial integration using data on bilateral banking linkages among twenty industrial countries in the...

The paper provides and empirical characterization of fiscal policy in the euro area and in a group of twenty-two OECD economies over the period from 1970 until 2007. Using the cyclically-adjusted fiscal balance we document that policy in the euro area has been mildly pro-cyclical. The adoption...

This paper was prepared for a session of the 2009 American Economic Association meeting devoted to examining the views of American economists about the euro and the European Economic and Monetary Union on the tenth anniversary of the euro. I had written an article in 1992 in the Economist and...

Andy Rose (2000), followed by many others, has used the gravity model of bilateral trade on a large data set to estimate the trade effects of monetary unions among small countries. The finding has been large estimates: Trade among members seems to double or triple, that is, to increase by...

This paper investigates whether or not the adoption of the Euro has facilitated the introduction of structural reforms, defined as deregulation in the product markets and liberalization and deregulation in the labor markets. After reviewing the theoretical arguments that may link the adoption of...

We test whether and how the adoption of the euro, narrowly defined as the end of competitive devaluations, has affected member states' productive structures, distinguishing between within and across sector reallocation. We find evidence that the euro has been accompanied by a reallocation of...