The 'Walters Critique' of the EMS - A Case of Inconsistent Expectations
Alan Walters has suggested that the European Monetary System will prove dynamically unstable when capital controls are removed. The argument is analyzed within a model where overlapping contracts generate price inertia. In this context, it is found that the short-run effects predicted by Walters only arise when the credibility of the peg differs as between the labor and financial markets: but even if such a difference exists, the system is stable in the long run. Copyright 1991 by Blackwell Publishers Ltd and The Victoria University of Manchester
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- Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
- Giavazzi, Francesco & Spaventa, Luigi, 1990.
"The `New' EMS,"
CEPR Discussion Papers
369, C.E.P.R. Discussion Papers.
- F. Giavazzi & L. Spaventa, 1990. "The "New" EMS," Working Papers 86, Dipartimento Scienze Economiche, Universita' di Bologna.
- Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834. Full references (including those not matched with items on IDEAS)