Working Paper
Is the ECU an optimal currency basket?
Abstract: Recently the role of the ECU has increased and there has been concern whether it is sustainable. The first part of this paper examines the composition of the ECU and investigates the impact of changes in this composition on the value of the ECU. The results show that when there is little exchange rate variability among the currencies that comprise the ECU or when the changes in composition are small the value of the ECU remains stable. The second part of this paper constructs an alternative, optimal basket of currencies for Germany and compares this basket to the ECU. The path of the optimal basket resembles the ECU path but is dramatically different from the DM/$.
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Bibliographic Information
Provider: Board of Governors of the Federal Reserve System (U.S.)
Part of Series: International Finance Discussion Papers
Publication Date: 1986
Number: 282