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Can The European Monetary System Be Copied Outside Europe? Lessons From Ten Years of Monetary Policy Coordination In Europe

  • Francesco Giavazzi
  • Alberto Giovannini

This paper addresses the question of whether the European Monetary System can be copied outside Europe. Our answer is negative. The EMS is just one element of a more comprehensive design of institutional integration within Europe: the presence of the European Economic Community, and the dependence of EEC institutions upon exchange rate stability lend credibility to EMS exchange rate targets in a way that would not be present. say, among the United States, Europe and Japan. The EMS has also reproduced previous experiences of fixed exchange rates by not imposing the exchange rate constraint symmetrically upon all member countries: the system has de facto worked as a DM-zone, thus confirming that the institution of fixed rates pg cannot induce international monetary cooperation. Finally, the differences in the use of the inflation tax among European countries and the divergent behavior of government debt after 1979 indicate that the pursuit of monetary convergence among countries with different fiscal structures might entail substantial fiscal reforms.

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File URL: http://www.nber.org/papers/w2786.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2786.

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Date of creation: Dec 1988
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Publication status: published as International Policy Coordination and Exchange Rate Fluctuations, W.H. Branson and J. Frenkel, eds., University of Chicago Press, 1990.
Handle: RePEc:nbr:nberwo:2786
Note: ITI IFM
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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Web page: http://www.nber.org
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  1. Paul R. Krugman, 1988. "Deindustrialization, Reindustrialization, and the Real Exchange Rate," NBER Working Papers 2586, National Bureau of Economic Research, Inc.
  2. Baldwin, Richard & Krugman, Paul, 1989. "Persistent Trade Effects of Large Exchange Rate Shocks," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 635-54, November.
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