The `Walters' Critique of the EMS: A Case of Inconsistent Expectations

Marcus Miller and Alan Sutherland ()

No 480, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Alan Walters has suggested that the European Monetary System will prove dynamically unstable when capital controls are removed. The argument is analysed within a model that includes overlapping contracts. It is found that the short-run effects predicted by Walters only arise when the credibility of the peg differs as between the labour and financial markets: but even if such a difference exists the system is stable in the long run.

Keywords: Credibility; Disinflation; European Monetary System; Stability (search for similar items in EconPapers)
Date: 1990-11
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Related works:
Journal Article: The "Walters Critique" of the EMS--A Case of Inconsistent Expectations? (1991)
Working Paper: The 'Walters Critique' of the EMS - A Case of Inconsistent Expectations (1990)
Working Paper: The 'Walters Critique' of the EMS - A Case of Inconsistent Expectations (1990)
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