Working Paper: CEPR ID: DP285
Authors: Francesco Giavazzi; Alberto Giovannini
Abstract: This paper addresses the question of whether the European Monetary System can be copied outside Europe. Our answer is negative. The presence of the EC and the dependence of EC institutions on 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 on all member countries: the System has de facto worked as a Deutschmark zone, confirming that the institution of fixed rates per se cannot induce international monetary cooperati.
Keywords: European Monetary System; Inflationary Expectations; Monetary Convergence; Seigniorage
JEL Codes: 430
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EMS's exchange rate targets (F33) | credibility of the system (E42) |
| EMS's unique institutional context (H11) | credibility of the system (E42) |
| EMS (C87) | disinflation in high inflation countries (E31) |
| EMS (C87) | shifts in inflationary expectations (E31) |
| West Germany's monetary policy (E58) | EMS's operation as a deutschmark zone (F36) |
| differences in fiscal policies among member states (H39) | complications in monetary convergence (F36) |
| EMS's structure (H12) | implications for international monetary cooperation (F33) |
| shifts in wage-price dynamics (E31) | statistical significance in France after 1979 (C12) |