Cite JOURNAL ARTICLE
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
Timothy D. Lane, Washington, D.C.
Daniel Gros, Washington, D.C.
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Begg, David: Alternative Exchange Rate Regimes: The Role of the Exchange Rate and the Implications for Wage-Price Adjustment, (mimeo, CEPR, April 1990).
Bhandari, Jagdeep S. (ed.): Exchange Rate Management Under Uncertainty (Cambridge MA: MIT Press, 1985).
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.