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do not jeopardise the stability of the world economy. today i intend to cover four items : the implications of the single currency for exchange rate policy, the institutional arrangements for the euro area ’ s exchange rate policy, exchange rate developments during the crisis and, finally, some other dimensions of international monetary cooperation. a single currency – a single exchange rate policy what did the creation of the euro mean for exchange rate policy? prima facie, the answer is straightforward. having a single currency automatically implies having a single exchange rate and thus also a single exchange rate policy. yet the repercussions of emu go beyond these “ automatic ” consequences. prior to emu, europe consisted of open and, for the most part, small economies. because of the very large size of the external sector compared with the national economy, the exchange rate played a very important role in the economic performance of these countries. the move to monetary union implied the creation of a new economic entity – “ euroland ” – which is much bigger and much more closed than its component states. this obviously reduces the importance of the exchange rate for “ domestic ” economic developments. in addition, monetary union – by definition – did away with nominal exchange rates between its participants. as a result, gone are the days when an economic or financial crisis could also trigger an exchange rate crisis. by setting up a bigger and less open economic entity and by eliminating intra - area exchange rates, the euro acts as a shield against external turbulence.. the economic crisis has clearly demonstrated this. in rough financial waters, it pays off to be on a large, solid and stable ship rather than on a small vessel. size matters in a global world. allow me therefore to make a bold point : the euro has arguably been the best exchange rate policy decision which europe has ever taken. institutional arrangements for exchange rate policy in the euro area this brings me to my second topic : the institutional arrangements for the euro area ’ s exchange rate policy. in describing these arrangements, we should distinguish between three categories of countries : eu countries which do not take part in erm ii, eu countries which are part of erm - ii, and non - eu countries. first, consider the eu countries which do not take part in erm ii. as eu member states, these countries are subject to the treaty. and the treaty is crystal clear : each country must treat its exchange rate policy as a matter of common interest. 1 this obligation should not be taken lightly