The Credibility of the United Kingdom's Commitment to the ERM : Intentions versus Actions
AbstractThe paper presents estimates of a model of the credibility of the U.K. commitment to its central parity against the deutsch mark during the period of ERM membership (1990-92). The measure of credibility used is the long term, interest differential with Germany. Credibility is decomposed into two aspects ; an assessment of whether the government was truly committed to the ERM, and the probability that even a committed government would be able to continue to bear the unemployment costs. Doubts about the first aspect which could lead to a self-fulfilling crises - are shown to have declined steadily during the period of ERM membership, while the second aspect is estimated to have become increasingly important, due to rising unemployment.
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Bibliographic InfoPaper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 430.
Length: 36 pages
Date of creation: 1994
Date of revision:
EMS ; monetary policy ; exchange rates;
Other versions of this item:
- Paul R. Masson, 1994. "The Credibility of the United Kingdom's Commitment to the ERM: Intentions versus Actions," IMF Working Papers 94/147, International Monetary Fund.
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
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- Schor, Armand-Denis, 2000. "La théorie des zones monétaires optimales : l’optimum, le praticable, le crédible et le réel," L'Actualité Economique, Société Canadienne de Science Economique, vol. 76(4), pages 545-576, dÃ©cembre.
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