Inflation and the E M S
AbstractSince the European Monetary System was instituted in March 1979, there has been a dramatic reduction in the inflation rates of member countries This development is widely attributed to the EMS itself. The purpose of this paper is to argue that the theoretical and empirical basis for such a claim is far from conclusive. On the theoretical side, the paper develops a model which highlights two issues. First, changes in the "rules" of the exchange rate system need not coincide with changes in expectations about Central Bank behavior. In fact, I expectations in France do not seem to have changed until policy makers "got tough" in 1982-83. Second, different researchers have made quite different I assumptions about exactly what "rules" the EMS imposes. The paper shows that how the system works matters in terns of the effect joining will have on inflation. On the empirical side, the paper shows that effects which have been attributed to the EMS are in large part due to the global deflation since 1979 and to the fact that EMS members had relatively low inflation before 1979. However, even these estimates should be interpreted with caution. They are very sensitive to time period and to which non EMS countries are included in the sample.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2599.
Date of creation: May 1988
Date of revision:
Publication status: published as The European Monetary System Cambride, Cambridge University Press, 1988
Note: ITI IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Melitz, Jacques, 1985. "The welfare case for the European Monetary System," Journal of International Money and Finance, Elsevier, vol. 4(4), pages 485-506, December.
- Kenneth S. Rogoff, 1984.
"Can exchange rate predictability be achieved without monetary convergence? : evidence from the EMS,"
International Finance Discussion Papers
245, Board of Governors of the Federal Reserve System (U.S.).
- Rogoff, Kenneth, 1985. "Can exchange rate predictability be achieved without monetary convergence? : Evidence from the EMS," European Economic Review, Elsevier, vol. 28(1-2), pages 93-115.
- Paul Grauwe, 1990. "The cost of disinflation and the European Monetary System," Open Economies Review, Springer, vol. 1(2), pages 147-173, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.