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Symmetry versus Asymmetry in a Fixed Exchange Rate System

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Lane, T., Gros, D. Symmetry versus Asymmetry in a Fixed Exchange Rate System. Credit and Capital Markets – Kredit und Kapital, 27(1), 43-66. https://doi.org/10.3790/ccm.27.1.43
Lane, Timothy D. and Gros, Daniel "Symmetry versus Asymmetry in a Fixed Exchange Rate System" Credit and Capital Markets – Kredit und Kapital 27.1, 1994, 43-66. https://doi.org/10.3790/ccm.27.1.43
Lane, Timothy D./Gros, Daniel (1994): Symmetry versus Asymmetry in a Fixed Exchange Rate System, in: Credit and Capital Markets – Kredit und Kapital, vol. 27, iss. 1, 43-66, [online] https://doi.org/10.3790/ccm.27.1.43

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Symmetry versus Asymmetry in a Fixed Exchange Rate System

Lane, Timothy D. | Gros, Daniel

Credit and Capital Markets – Kredit und Kapital, Vol. 27 (1994), Iss. 1 : pp. 43–66

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Article Details

Author Details

Timothy D. Lane, Washington, D.C.

Daniel Gros, Washington, D.C.

References

  1. Barro, Robert S.: Rational Expectations and the Role of Monetary Policy, Journal of Monetary Economics, Vol. 2, No. 1 (Jan. 1976), pp. 1- 32.  Google Scholar
  2. Begg, David: Alternative Exchange Rate Regimes: The Role of the Exchange Rate and the Implications for Wage-Price Adjustment, (mimeo, CEPR, April 1990).  Google Scholar
  3. Bhandari, Jagdeep S. (ed.): Exchange Rate Management Under Uncertainty (Cambridge MA: MIT Press, 1985).  Google Scholar

Abstract

Moving from the European Monetary System (EMS) to a European Monetary Union (EMU) implies a move from an asymmetric to a symmetric currency system. This paper uses a simple two-country model to compare the impact of various shocks on each country’s economy under alternative monetary arrangements, providing a basis for comparing symmetric and asymmetric systems and permitting an interpretation of the member countries’ divergent interests and the resulting Nash equilibrium. The analysis implies that the removal of trade barriers through the European Single Market plan and the additional shocks associated with German unification may partly explain the recent move toward a symmetrical system.