The Exchange Rate - A Shock-Absorber or Source of Shocks? A Study of Four Open Economies

Michael Artis and Michael Ehrmann

No 2550, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The paper provides SVAR estimates for four open economies: the UK, Canada, Sweden and Denmark, making explicit a monetary policy reaction function and taking account of exchange rate targeting practices. The object of the analysis is to examine the idea that an independent money and exchange rate should allow for effective shock-absorption. A polar extreme would be that exchange markets breed their own, and destabilizing, shocks. The paper?s findings vary from one economy to another: monetary union appears easy to recommend for Sweden and Denmark, much less so for Canada and the UK.

Keywords: Optimal currency area; Structural vector autoregression; Uk; Canada; Denmark; Sweden; Emu (search for similar items in EconPapers)
JEL-codes: C32 E42 F31 F33 (search for similar items in EconPapers)
Date: 2000-09
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Citations: View citations in EconPapers (34)

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Related works:
Journal Article: The exchange rate - A shock-absorber or source of shocks? A study of four open economies (2006)
Working Paper: The Exchange Rate -a Shock-Absorber or Source of Shocks? A Study of Four Open Economies (2000)
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