The Credibility of the United Kingdom's Commitment to the ERM: Intentions versus Actions

Paul Masson

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: The paper presents estimates of a model of the credibility of the U.K. commitment to its central parity against the deutsch mark during the period of ERM membership (1990-92). The measure of credibility used is the long term, interest differential with Germany. Credibility is decomposed into two aspects ; an assessment of whether the government was truly committed to the ERM, and the probability that even a committed government would be able to continue to bear the unemployment costs. Doubts about the first aspect which could lead to a self-fulfilling crises - are shown to have declined steadily during the period of ERM membership, while the second aspect is estimated to have become increasingly important, due to rising unemployment.

Keywords: EMS; monetary policy; exchange rates (search for similar items in EconPapers)
JEL-codes: E43 F31 F33 (search for similar items in EconPapers)
Pages: 36 pages
Date: 1994
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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https://warwick.ac.uk/fac/soc/economics/research/w ... 89-1994/twerp430.pdf

Related works:
Working Paper: THE CREDIBILITY OF THE UNITED KINGDOM'S COMMITMENT TO THE ERM: INTENTIONS VERSUS ACTIONS (1994)
Working Paper: The Credibility of the United Kingdom's Commitment to the Erm: Intentions Versus Actions (1994)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:430

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