The Prospect of a Depreciating Dollar and Possible Tension Inside the EMS

Jacques Melitz

No 97, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The depreciation of the dollar can lead to conflict within the European Monetary System. In order to develop this theme, I assume that the preferences of German policy-makers are more strongly anti-inflationary than those of the French. This means that the depreciation of the dollar will suit the Germans better than the French. Consequently, a dilemma can arise, wherein no possible realignment can resolve the conflict between France and Germany. Only a return to the conditions of the "snake" will do. That is, France may need to accept a situation where it bears exclusive responsibility for defending the jointly determined parity. But it may not be in the interests of the French nor even, possibly, those of the Germans for France to do so.

Keywords: Dollar Depreciation; European Monetary System; Policy Conflict (search for similar items in EconPapers)
Date: 1986-03
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Journal Article: The Prospect of a Depreciating Dollar and Possible Tension Inside the EMS (1988)
Working Paper: The prospect of a depreciating dollar and possible tension inside the EMS (1986)
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