Counter-Inflationary Policy in the Framework of the EMS

Michael Artis

No 649, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The conditions of the `new EMS' - an absence of exchange rate realignments and corresponding added credibility - have given rise to concern about the stabilization properties of the System. Nominal interest rate divergence may have been narrowed ahead of inflation divergence. Cross-country real interest rankings would then assume a negative correlation with the corresponding inflation rankings. The paper argues that on theoretical grounds, a perverse correlation between real interest rates and inflation can be predicted for `old EMS' conditions. Empirical evidence supports this prediction while failing to confirm it for the `new EMS'.

Keywords: European Monetary System; Inflation; Real Interest Rates (search for similar items in EconPapers)
JEL-codes: E52 F31 F41 (search for similar items in EconPapers)
Date: 1992-03
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=649 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
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:cpr:ceprdp:649

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... pers/dp.php?dpno=649

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().