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Regional exchange rate arrangements in a world of floating rates: The experience of the EMS

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  • Galy, Michel

Abstract

This paper reviews the economic and monetary impacts of the creation of the 1979 European Monetary System on the participating countries and shows that they did not meet all the required theoretical criteria for a successful monetary integration process. Despite this handicap, the 1979 monetary arrangement has succeeded in stabilizing nominal exchange rates and in fostering a move towards a greater co-ordination of monetary policies between some participating countries. On the other hand, the stabilization of nominal exchange rates was accompanied by a lasting decline in the competitiveness of some member countries with a consecutive weakening effect on their economies. However, the relative deflationary impact that was anticipated by some authorities at the outset for the monetary union as a whole has not yet materialized.

Suggested Citation

  • Galy, Michel, 1982. "Regional exchange rate arrangements in a world of floating rates: The experience of the EMS," MPRA Paper 62293, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:62293
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    References listed on IDEAS

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    1. Thomas Willett & Edward Tower, 1970. "Currency areas and exchange-rate flexibility," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 105(1), pages 48-65, September.
    2. Fair, Ray C, 1982. "Estimated Output, Price, Interest Rate, and Exchange Rate Linkages among Countries," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 507-535, June.
    3. Frenkel, Jacob A. & Rodriguez, Carlos A., 1980. "Exchange Rate Dynamics and Overshooting Hypothesis," Foerder Institute for Economic Research Working Papers 275323, Tel-Aviv University > Foerder Institute for Economic Research.
    4. Turnovsky, Stephen J, 1976. "The Relative Stability of Alternative Exchange Rate Systems in the Presence of Random Disturbances," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 8(1), pages 29-50, February.
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    Cited by:

    1. Galy, Michel, 1987. "A synthetic indicator for the currencies of the G5 countries," MPRA Paper 62487, University Library of Munich, Germany.

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    More about this item

    Keywords

    European Monetary System; Optimum currency area; Monetary policy; Monetary Integration; Fixed exchange rates; floating exchange rates; Effective exchange rate indices;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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