Credibility, interest rates and the ERM: the Irish experience, 1986-92

Brendan M. Walsh

No 199301, Working Papers from School of Economics, University College Dublin

Abstract: As one of a set of policies designed to reduce inflation and interest rates to the levels prevailing in Germany the Irish pound has been stabilised in the Exchange Rate Mechanism (ERM) of the European Monetary System since 1986. This paper examines the effect of this policy on short-term interest rates in Ireland. Only limited evidence is found that the exchange rate policy contributed to the reduction in the German-Irish interest rate differential. Sterling interest rates and the level of the Irish pound/sterling exchange rate have continued to influence the level of Irish interest rates. This was bourne out by the impact of the turbulence of September 1992 on Irish money markets. It is suggested that the costs of rigidly pegging the Irish pound in the ERM may outweigh the benefits of this policy.

Keywords: European Monetary System (Organization); Interest rates--Ireland; Foreign exchange rates--Ireland (search for similar items in EconPapers)
Date: 1993-01
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://hdl.handle.net/10197/1689 First version, 1993 (application/pdf)

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:ucn:wpaper:199301

Access Statistics for this paper

More papers in Working Papers from School of Economics, University College Dublin Contact information at EDIRC.
Bibliographic data for series maintained by Nicolas Clifton ().