The Effect of the ERMon Participating Economies

IMF Working Papers, September 1, 1991

Source details

Analysis uses vector autoregression techniques.
Focus is on the effect of membership of the ERM on macroeconomic performance.
Examination covers both the nature of shocks hitting economies and the response of member countries to these shocks.

The ERM has had little effect on the nature of the shocks hitting the economies.
The ERM has had a significant effect on the response of member countries to these shocks.
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.

Subject: Conventional peg, Economic theory, Exchange rate arrangements, Exchange rate flexibility, Floating exchange rates, Foreign exchange, Supply shocks
Keywords: Conventional peg, demand and supply shock, ERM correlation coefficients, ERM country, ERM member, Europe, exchange rate, Exchange rate arrangements, Exchange rate flexibility, Floating exchange rates, open economy, supply and demand demand shock, supply curve, Supply shocks, WP

Also published in Staff Papers, Vol. 39, No. 2, June 1992.
Pages: 36
Series: Working Paper No. 1991/086
Issue: 086
DOI: https://doi.org/10.5089/9781451953725.001
ISBN: 9781451953725
ISSN: 1018-5941
Disclaimer: "This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate."

The Effect of the ERMon Participating Economies — Tamim Bayoumi; September 1, 1991.