Working Paper Series
Exchange-Rate and Interest-Rate Driven Competitive Advantages in the EMU
() and Lars Oxelheim
Abstract: Real exchange and interest rates may still fluctuate
inside the EMU and give rise to changes in competitiveness. We find, in
contrast to what is generally expected, no convergence in these variables
after the introduction of the euro. On the contrary, a divergence is found
that is extraordinary when compared to the preceding 40 years. The
magnitude of the divergence should urge on a wave of restructuring in the
EMU, conditioned upon adequate policy responses. The worst-case scenario
involves a flight to structural support and protectionism, challenging the
whole idea of the EMU.
Keywords: Real Exchange Rates; Real Interest Rates; EMU; Competitive Advantage; Restructuring; (follow links to similar papers)
JEL-Codes: E31; E44; F15; F23; G34; (follow links to similar papers)
31 pages, March 12, 2002
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