From the EMS to EMU: Has There Been Any Change in the Behaviour of Exchange Rate Correlation?

It has been eight years since the Economic and Monetary Union (EMU) displaced the European Monetary System (EMS), with the euro becoming the legal successor to the European Currency Unit (ECU). Studies on macroeconomic, international economic and microeconomic issues surrounding this important international monetary development have flourished in the economics and finance literature. There is, however, one question that has received no attention: Has the move to EMU changed the behaviour of exchange rate correlations between the euro (ECU) and other currencies? This question has to do with the debates on the success and prospects of the euro, and so deserves exploration in this short paper. Specifically, our study is motivated by the following considerations. [ABSTRACT FROM AUTHOR]