Monetary Discipline, Germany, and the European Monetary System

Jacques Melitz

No 178, CEPR Discussion Papers from Centre for Economic Policy Research

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; Germany; Inflation; Monetary Discipline; Monetary Policy (search for similar items in EconPapers)
Date: 1987-04
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