The Effect of the ERMon Participating Economies

Tamim Bayoumi

No 1991/086, IMF Working Papers from International Monetary Fund

Abstract: The effect of membership of the ERM on macroeconomic performance is analyzed using vector autoregression techniques. The results indicate that while the ERM has had little effect on the nature of the shocks hitting the economies, it has had a significant effect on the response of member countries to these shocks. In addition, long-time members of the ERM have significantly more correlated shocks than other countries. These results conform to the thesis that the ERM represents a move by countries with relatively similar underlying shocks to coordinate macroeconomic policy.

Keywords: WP; exchange rate; ERM member; supply curve; open economy; ERM correlation coefficients; demand and supply shock; ERM country; supply and demand demand shock; Supply shocks; Exchange rate arrangements; Conventional peg; Floating exchange rates; Exchange rate flexibility; Europe (search for similar items in EconPapers)
Pages: 36
Date: 1991-09-01
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: The Effect of the ERM on Participating Economies (1992)
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