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Credibility and Disinflation in the European Monetary System


  • Bleaney, Michael
  • Mizen, Paul


Analysis of interest differentials in the European Monetary System has suggested a widespread lack or credibility of the Exchange Rate Mechanism (ERM) in the sense that in most countries the implicit expected rate of devaluation was significant and not far short of inflation differentials vis-a-vis the deutschmark. The authors present and test a model in which prices reflect expectations of exchange rate behavior. The results provide mixed evidence that price-setting in countries that participated in the ERM was influenced by the exchange rate discipline. Copyright 1997 by Royal Economic Society.

Suggested Citation

  • Bleaney, Michael & Mizen, Paul, 1997. "Credibility and Disinflation in the European Monetary System," Economic Journal, Royal Economic Society, vol. 107(445), pages 1751-1767, November.
  • Handle: RePEc:ecj:econjl:v:107:y:1997:i:445:p:1751-67

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    References listed on IDEAS

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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Nicolas Sobczak, 1998. "Disinflation in Spain; The Recent Experience," IMF Working Papers 98/106, International Monetary Fund.
    2. Nicholas Sarantis & Chris Stewart, 2000. "The ERM Effect, Conflict and Inflation in the European Union," International Review of Applied Economics, Taylor & Francis Journals, vol. 14(1), pages 25-43.
    3. Guerineau, Samuel & Guillamont Jeanneney, Sylviane, 2005. "Deflation in China," China Economic Review, Elsevier, vol. 16(4), pages 336-363.
    4. Demertzis, Maria & Hallett, Andrew Hughes, 1998. "Asymmetric transmission mechanisms and the rise in European unemployment: A case of structural differences or of policy failures?," Journal of Economic Dynamics and Control, Elsevier, vol. 22(6), pages 869-886, June.
    5. Armando Méndez Morales, 1998. "Determinants of Growth in an Error; Correction Model for El Salvador," IMF Working Papers 98/104, International Monetary Fund.

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