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The Guilder: A Case Study of a Hard Currency Policy

In: The Road to European Monetary Union

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  • André Szász

    (Dutch Central Bank)

Abstract

After August 1993, when the EMS in its original form ceased to exist, there was a widespread tendency to argue that in a world with unlimited capital mobility exchange rate stability was no longer feasible. I heard this comment made at the IMF and elsewhere, usually followed by the afterthought that, of course, this did not apply to the guilder in relation to the German mark. The question is, why not? One answer is that the Netherlands’ (and Austria’s) ‘natural economic integration with Germany is such that the ERM is not even necessary.’1 This does not explain, however, the difference with other economies equally dependent on Germany, such as Belgium or Denmark, nor is it consistent with repeated devaluations of the guilder against the German mark up to 1983. Another answer, more to the point, is that—in view of this dependence — the Dutch authorities have pursued a policy linking the guilder to the German mark more consistently than others. If so, it is a question of policies as well as of economic dependence. In this chapter I shall discuss these policies as a case study of successful pegging in the Exchange Rate Mechanism of the EMS.

Suggested Citation

  • André Szász, 1999. "The Guilder: A Case Study of a Hard Currency Policy," Palgrave Macmillan Books, in: The Road to European Monetary Union, chapter 21, pages 196-212, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-59947-5_21
    DOI: 10.1057/9780230599475_21
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