Abstract

In this paper an analysis on dollar/euro exchange rate, oil price and European Central Bank monetary policy is worked out. Firstly, data on the main variables related with the exchange rate and an equation to explain the variation of the exchange rate in the period March 1998-September 2000 are presented; secondly, the consequences of oil price growth and eurodevaluation on the US and European economies are taken into account; lastly, different policy strategies to stop eurodevaluation are discussed. The European Central Bank strategy, that consists of small increases of the interest rate, is not reaching any result. An alternative strategy is based on innovative public demand, that should be financed by European bonds using central bank excess funds as security. Public demand of infrastructures and new technologies should aim at reducing oil dependence and would stimulate growth and sustainable development in Europe, with positive effects on the exchange rate. JEL Codes: E58, F31 Keywords: Devaluation, Exchange Rates, Monetary

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