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Is there a “triffin dilemma” for the EMS?

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  • Lorenzo Bini-Smaghi
  • Silvia Vori

Abstract

The question explored in this paper is whether the EMS can continue to perform efficiently and ensure low inflation in an economically and financially integrated area with a high degree of currency substitution. A dilemma may arise: on the one hand, currency substitution should be accommodated to provide market participants with the currency they desire; on the other, currency substitution should not determine an excess of liquidity in the system leading to inflation. These objectives might be difficult to reconcile in a system with decentralized asymmetric monetary policy cooperation such as the EMS and might have adverse consequences for the monetary stability of the system. Copyright Kluwer Academic Publishers 1993

Suggested Citation

  • Lorenzo Bini-Smaghi & Silvia Vori, 1993. "Is there a “triffin dilemma” for the EMS?," Open Economies Review, Springer, vol. 4(2), pages 175-188, June.
    • Handle: RePEc:kap:openec:v:4:y:1993:i:2:p:175-188
    DOI: 10.1007/BF01000518
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    References listed on IDEAS

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