Lennart Bergbom: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Abstract: An often heard view is that exchange rate variability will decrease for a country that joins the EMU. This is not necessarily true. Both real and nominal exchange rate variability increase under certain circumstances when asymmetric demand shocks occur inside or outside the union. These results are obtained theoretically within a standard international macro-model but they also remain valid in a numerical simulation of this model.
48 pages, December 8, 1998
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