Euro Weakness in the Late Nineties

The depreciation of the euro vis-à-vis the dollar over its first two years is a fact of life. By contrast the present paper offers some econometric evidence with daily data that, within a sticky price framework, monetary fundamentals may have played a role in this depreciation. A fast monetary expansion with continental European interest rate convergence in 1998 and an accommodative ECB monetary stance in 1999 would thus bear some responsibility in the weakening of the euro