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European monetary arrangements: implications for the dollar, exchange rate variability and credibility

Hali Edison () and Linda S. Kole

No 468, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper uses the recent history of the ERM to gain insights into what might happen to exchange rates on the road to EMU. To do this, the paper examines the variability of exchange rates, the transmission of monetary policy between countries, the role of the dollar in ERM exchange rate crises, and ERM members' credibility as measured by the realignment probabilities prior to the September 1992 crisis. We find that behavior of exchange rates has changed over time and differs between ERM and non-ERM currencies. We identify two factors that might have contributed to the September 1992 crisis: high German interest rates and weakness of the U.S. dollar.

Keywords: European Monetary System (Organization); Foreign exchange rates; Dollar, American (search for similar items in EconPapers)
Date: 1994
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Journal Article: European monetary arrangements: Implications for the dollar, exchange rate variability and credibility (1995) Downloads
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