Is the ECU an optimal currency basket?

Hali Edison ()

No 282, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Recently the role of the ECU has increased and there has been concern whether it is sustainable. The first part of this paper examines the composition of the ECU and investigates the impact of changes in this composition on the value of the ECU. The results show that when there is little exchange rate variability among the currencies that comprise the ECU or when the changes in composition are small the value of the ECU remains stable. The second part of this paper constructs an alternative, optimal basket of currencies for Germany and compares this basket to the ECU. The path of the optimal basket resembles the ECU path but is dramatically different from the DM/$.

Keywords: European currency unit; Foreign exchange rates (search for similar items in EconPapers)
Date: 1986
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Citations: View citations in EconPapers (3)

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