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Credibility and Duration in Target Zones: Evidence from the EMS

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Simón Sosvilla-Rivero
Francisco Pérez-Bermejo

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Abstract

This paper is devoted to the analysis of the past, present, and future of the European Monetary System (EMS). After examining its background, we review the structure and operation of the EMS, as well as the theoretical framework used to explain exchange-rate movements inside official fluctuation bands. Moreover, we offer some comments and assessment on the EMS in the light of empirical papers examining the EMS from both the credibility and currency crisis approaches, with special emphasis on the survival of the central parities. Finally, drawing on the EMS experience, we make some remarks on new EMS, linking the currencies of non-euro area Member States to the euro, both current European Union Member States and future candidates.

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Paper provided by FEDEA in its series Working Papers with number 2003-19.

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Handle: RePEc:fda:fdaddt:2003-19

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  19. Sosvilla-Rivero, Simon & Fernandez-Rodriguez, Fernando & Bajo-Rubio, Oscar, 1999. "Exchange Rate Volatility in the EMS before and after the Fall," Applied Economics Letters, Taylor and Francis Journals, vol. 6(11), pages 717-22, November. [Downloadable!] (restricted)
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  1. José A. Herce, . "Could this ever happen in Spain? Economic and policy aspects of a SARS-like episode," Working Papers 2004-09, FEDEA. [Downloadable!]
  2. Francisco Pérez-Bermejo & Simón Sosvilla-Rivero, . "Currency Crises and Political Factors: Drawing Lessons from the EMS Experience," Working Papers 2004-04, FEDEA. [Downloadable!]
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