Is there a third way to EMU for the EU accession countries?

Bofinger, Peter and Wollmershäuser, Timo (2001): Is there a third way to EMU for the EU accession countries? In: Economic Systems, Vol. 25, No. 3: pp. 253-274

Abstract

The actual mainstream view of academics emphasizes the so-called \"two-corner solution\" with either completely fixed or independently floating exchange rates. We will argue in this paper that the requirements for fixed rates are rather too restrictive to be successful. On the other hand, the advantage of an independent float is only valid for small open economies under the assumption of exchange rate movements closely related to movements in the fundamentals. We suggest as a \"third way\", a strategy of flexible exchange rate targeting where central banks simultaneously manage interest rates and exchange rates in a way that guarantees both the achievement of domestic macroeconomic objectives and an equilibrium on the international financial markets.

• Item Type: Journal article
• Faculties: Economics; Economics > Chairs > Chair in Public Finance
• Subjects: 300 Social sciences > 330 Economics
• Language: English