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Évaluation du processus d'intégration monétaire au sein du Système Monétaire Européen
[Evaluation of the monetary integration process within the European Monetary Ststem]

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  • Galy, Michel

Abstract

The question whether the European Monetary System has brought about a reduction in the variability of its members' exchange rates is not a trivial issue since central rates are adjustable and bilateral exchange rates are allowed to move freely within fairly large margins. In this paper I have found clear evidence after 1979 of a reduction in nominal exchange rate variability but only mixed results when the same analysis is applied to real exchange rates. Several factors might account for these results. An attempt is made to assess the specific influence of changes in monetary and exchange rate policies. The evidence derived from an application of the principal component analysis to interest rates and the first results provided by an ad-hoc empirical model on the reaction functions of some EMS central banks point to the prominent role played after 1979 by more convergence in monetary policies and more forceful interventions on the foreign exchange markets.

Suggested Citation

  • Galy, Michel, 1985. "Évaluation du processus d'intégration monétaire au sein du Système Monétaire Européen [Evaluation of the monetary integration process within the European Monetary Ststem]," MPRA Paper 62353, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:62353
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    References listed on IDEAS

    as
    1. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-853, October.
    2. Stephen J. Turnovsky, 1973. "Optimal Stabilization Policies for Deterministic and Stochastic Linear Economic Systems," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(1), pages 79-95.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    European monetary system; Monetary independence; Monetary policy; Monetary integration; Monetary coordination; Central banks' reaction function; Central banks' foreign exchange intervention; Interest rates; Fixed exchange rate regime; Floating exchange rate regime; Exchange rate volatility; Principal component analysis.;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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