Whether the euro itself is overvalued or undervalued is a matter of opinion, but it surely has not risen like the deutsche mark
or the neue deutsche mark
would have had the eurozone broken up.
Their results also indicated that sterling's link to the dollar declined after the official announcement of the UK'S 'shadowing the Deutsche mark
' policy in the Spring of 1987 and generally up until 1989.
(31) Capie and Woods (2001), in their review of Fifty Years of the Deutsche Mark
, cite Richter (1999, 562):
For this reason, we find it useful to study what was arguably the most successful unilateral exchange rate peg: Austria's peg to the Deutsche mark
prior to Austria's entry into the European Monetary System in 1995.
If the company has no view on the direction of the deutsche marks
, the management can look at the forward rates and quote a deutsche mark
price for the pineapples to be paid in three months time.
We have used these option prices to calculate the probability distribution for the krone exchange rate against the Deutsche mark
since 1 January 1998.
dollar-local currency (i.e., German deutsche mark
Modeste explained the decline in the market resulted from problems in Germany's economy over the years, following the decline in the exchange rate of the Deutsche mark
during the last 10 years.
Let's assume the final exchange rates to the dollar fixed into the euro are 5 for the French franc, 1.9 for the deutsche mark
and 40 for the Belgian franc.
One strand of this approach focuses on the credibility of each currency's peg to the deutsche mark
, arguing that the stance of domestic interest groups and political parties on monetary policy is critical to maintaining the confidence of markets.(11) A second strand focuses on changes in domestic politics that produced a convergence of national preferences among European states on exchange-rate stabilization in the late 1970s and on low inflation over the course of the 1980s.
Of all the European Community countries, only the Netherlands and Austria managed their economies in such a way that their currencies remained unchanged vis-a-vis the deutsche mark
for more than twenty years.(1) France had to devalue its currency several times until it embarked on a "Franc-fort-policy"(2) in the late eighties.
Germany was not under any pressure at the time to reform either its economy in general or its monetary regime in particular--in fact, the breakdown of Bretton Woods was in part due to the extreme relative credibility of the German central bank's commitment to price stability and the concomitant appreciation of the deutsche mark
. Under these circumstances, the loss of the exchange rate anchor was not the sort of credibility crisis where macroeconomic effects demanded an immediate response, as demonstrated by the slow (two-to-three-year-long) move to the new regime.