Working Paper: CEPR ID: DP178
Authors: Jacques Melitz
Abstract: This paper explores the hypothesis that the non-German members of the European Monetary System (EMS) draw benefits from the system because of the monetary discipline that it imposes upon them. The hypothesis explains the dominant position of Germany in the EMS and is consistent with the evidence that membership has induced several countries to disinflate more than they would have done otherwise. Analysis shows, however, that the required conditions for the hypothesis to work are very stringent. Even if the conditions are met, the non-German members could obtain the advantages of monetary discipline in other ways.
Keywords: European Monetary System; Monetary Discipline; Inflation Policies
JEL Codes: 431; 432
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EMS membership (J60) | disinflationary policies in non-German countries (E65) |
| EMS membership (J60) | inflation rates in non-German countries (N14) |
| German monetary policy (E58) | behavior of non-German countries (F55) |