The fragility of two monetary regimes: The European Monetary System and the Eurozone

Paul De Grauwe and Yuemei Ji ()

No 243, Working Paper Research from National Bank of Belgium

Abstract: We analyze the similarities and the differences in the fragility of the European Monetary System (EMS) and the Eurozone. We test the hypothesis that in the EMS the fragility arose from the absence of a credible lender of last resort in the foreign exchange markets while in the Eurozone it was the absence of a lender of last resort in the long-term government bond markets that caused the fragility. We conclude that in the EMS the national central banks were weak and fragile, and the national governments were insulated from this weakness by the fact that they kept their own national currencies. In the Eurozone the roles were reversed. The national central banks that became part of the Eurosystem were strengthened.

Keywords: government bond markets; interbank money market; interest rate spread; Eurozone; EMS; fragility (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 F33 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2013-10
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.nbb.be/doc/ts/publications/wp/wp243en.pdf (application/pdf)

Related works:
Journal Article: The Fragility of Two Monetary Regimes: The European Monetary System and the Eurozone (2015)
Working Paper: The Fragility of two Monetary Regimes: The European Monetary System and the Eurozone (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbb:reswpp:201310-243

Access Statistics for this paper

More papers in Working Paper Research from National Bank of Belgium Contact information at EDIRC.
Bibliographic data for series maintained by ().