What the euro means for the dollar and the international Monetary system

This article begins by analyzing the hirtorical importance of the introduction of the euro, the convergence criteria for membership in the European Monetary Union, the merits and defects of the euro as an international rival to the dollar, and the characteristics that have made past international currencies great. It goes on to consider the institutional gap in the world system arising from the absence of an official world currency and the threat to stability that arises in transition periods when a new international reserve asset or currency is phased in. It is argued that the introduction of the euro will involve diversification from the dollar that will require multilateral attention to the dollar-euro exchange rate.Distinguished Address presented at the Forty-Fifth International Atlantic Economic Conference, Rome, Italy, March 14–21, 1998.