Should the ECB Adopt an Explicit Exchange Rate Target?

Petri Mäki-Fränti
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Petri Mäki-Fränti: School of Management, University of Tampere

No 210, Working Papers from Tampere University, Faculty of Management and Business, Economics

Abstract: This paper investigates with a structural, quantitative macro model, whether the ECB should include the real exchange rate into its reaction function. The problem is considered from viewpoints of both the whole monetary union and a single member country with a national economy more open than the union economy on average. According to the results, the member country would benefit from the exchange rate stabilizing more than the rest of the union. It appears however, that the asymmetries of the external shocks facing the economies may be a more important factor behind the larger volatility of the inflation and output of the member country than the structural differences.

Keywords: Euro-area; monetary policy rules; optimal currency areas (search for similar items in EconPapers)
JEL-codes: E32 E52 E58 F42 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2002-04
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http://urn.fi/urn:isbn:951-44-5364-6 First version, 2002 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:tam:wpaper:0210

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