Template-Type: ReDIF-Paper 1.0
Title: Converting EMS to EMU: Why not at Par with Sterling?
Author-Name: Martin Klein
Author-Name: Manfred J. M. Neumann
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Classification-JEL: 310, 431, 432
Keywords: EMS, EMU, Currency Reform, Exchange Rates
Abstract: This paper considers the optimal choice of the numeraire for the 
 curency conversion that will constitute the final step in the transition 
 from EMS to EMU. At the moment it seems to be understood that the current 
 basket-structured ECU will be chosen for this purpose. We argue that this 
 choice is not justified on economic grounds and explore possible 
 alternatives. Our major conclusions are: First, the current ECU is not the 
 cost-minimizing choice of numeraire; it is preferable to use the national 
 currency of an EMS member. Second, The Pound sterling should be the first 
 choice for the numeraire currency. Third, if sterling is politically not 
 feasible because Great Britain does not participate in EMU from the start, 
 the only realistic choice left is the DM.
Series: Sonderforschungsbereich 303, University of Bonn, Germany
Length: 21 pages
Creation-Date: 1991-11
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Handle: RePEc:bon:bonsfb:201