Description

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The purpose of this collection is to shed light on the processes that lead to convergence or divergence in national inflation rates. It examines inflation and wage behavior in the European Monetary System (EMS), their determinants, and their implications for the credibility and sustainability of the system's exchange rate mechanism (ERM). The contributors examine issues of monetary control, stability of national and ERM-wide money-demand functions, and the influence of the monetary policy of Germany - the pivotal country in the EMS. They identify several causes of inflation and persistent inflation differentials in the EMS. As well as explaining how the EMS worked, the book also offers reasons for its breakdown in 1992-3 under the blow of exogenous shocks and growing policy conflict between member countries.