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ERM crisis in retrospect: What if a European central bank had been in existence before 1992?

  • Yeh, Kuo-chun
  • Ho, Tai-kuang

This paper explores whether policy coordination or a single monetary policy implemented earlier would have kept the U.K. in the process of European monetary integration. On the basis of the pre-ERM crisis empirics by Douven and Plasmans (1996), a counterfactual game simulation approach is used, and five scenarios are established for comparison with the actual historical records. The final answer is negative.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 28 (2011)
Issue (Month): 4 (July)
Pages: 1526-1535

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Handle: RePEc:eee:ecmode:v:28:y:2011:i:4:p:1526-1535
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. Barry Eichengreen & Charles Wyplosz, 1993. "The Unstable EMS," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 51-144.
  2. Robert A. Mundell, 2000. "A Reconsideration of the Twentieth Century," American Economic Review, American Economic Association, vol. 90(3), pages 327-340, June.
  3. M. Hashem Pesaran & L. Vanessa Smith & Ron P. Smith, 2005. "What if the UK had Joined the Euro in 1999? An Empirical Evaluation using a Global VAR," IEPR Working Papers 05.24, Institute of Economic Policy Research (IEPR).
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  5. Jean Boivin & Marc P. Giannoni & Benoît Mojon, 2008. "How Has the Euro Changed the Monetary Transmission?," NBER Working Papers 14190, National Bureau of Economic Research, Inc.
  6. van Aarle, B. & Engwerda, J.C. & Plasmans, J.E.J., 2002. "Monetary and fiscal policy interaction in the EMU : A dynamic game approach," Other publications TiSEM 2a6eddfa-a4f2-4cc9-a352-b, School of Economics and Management.
  7. R. A. Mundell, 2000. "Erratum: A Reconsideration of the Twentieth Century," American Economic Review, American Economic Association, vol. 90(5), pages 1535-1535, December.
  8. Barry Eichengreen, 2000. "The EMS Crisis in Retrospect," NBER Working Papers 8035, National Bureau of Economic Research, Inc.
  9. Charles Wyplosz, 2006. "European Monetary Union: the dark sides of a major success," Economic Policy, CEPR;CES;MSH, vol. 21(46), pages 207-261, 04.
  10. Douven, R. C. & Plasmans, J. E. J., 1996. "SLIM, a small linear interdependent model of eight EU-member states, the USA and Japan," Economic Modelling, Elsevier, vol. 13(2), pages 185-233, April.
  11. Barrell, Ray & Pain, Nigel & Hurst, Ian, 1996. "German Monetary Union: An historical counterfactual analysis," Economic Modelling, Elsevier, vol. 13(4), pages 499-518, October.
  12. Obstfeld, Maurice, 1996. "Models of Currency Crises with Self-fulfilling Features," CEPR Discussion Papers 1315, C.E.P.R. Discussion Papers.
  13. Engwerda, J. C., 1998. "Computational aspects of the open-loop Nash equilibrium in linear quadratic games," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1487-1506, August.
  14. Smith, Ron, 2009. "EMU and the Lucas Critique," Economic Modelling, Elsevier, vol. 26(4), pages 744-750, July.
  15. Francesco Giavazzi & Alberto Giovannini, 1988. "Can The European Monetary System Be Copied Outside Europe? Lessons From Ten Years of Monetary Policy Coordination In Europe," NBER Working Papers 2786, National Bureau of Economic Research, Inc.
  16. Engwerda, J.C., 1998. "Computational aspects of the open-loop Nash equilibrium in linear quadratic games," Other publications TiSEM f71557c9-9b9d-4947-b774-b, School of Economics and Management.
  17. Emmanuel Dubois & Jérôme Hericourt & Valérie Mignon, 2007. "Costs and Benefits of Euro Membership: a Counterfactual Analysis," Working Papers 2007-17, CEPII research center.
  18. repec:ner:tilbur:urn:nbn:nl:ui:12-75998 is not listed on IDEAS
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