Credibility and Duration in Target Zones: Evidence from the EMS

FEDEA Working Paper No. 2003-19

42 Pages Posted: 12 Nov 2003

See all articles by Simon Sosvilla-Rivero

Simon Sosvilla-Rivero

UCM Institute for Economic Analysis

Francisco Perez-Bermejo

Foundation for Applied Economic Research (FEDEA)

Abstract

This paper is devoted to the past, present, and future of the European Monetary System (EMS). After examining its background, the paper reviews the structure and operation of the EMS, as well as the theoretical framework used to explain exchange-rate movements inside official fluctuation bands. Moreover, we offer some comments and assessment on the EMS in the light of empirical papers examining the EMS from both the credibility and currency crisis approaches, with special emphasis on the survival of the central parities. Finally, drawing on the EMS experience, we make some remarks on new EMS, linking the currencies of non-euro area Member States to the euro, both current European Union Member States and future candidates.

Keywords: Credibility, Currency crises, Exchange rates, European Monetary System

JEL Classification: C32, C41, F31, F33

Suggested Citation

Sosvilla-Rivero, Simon and Perez-Bermejo, Francisco, Credibility and Duration in Target Zones: Evidence from the EMS. FEDEA Working Paper No. 2003-19. Available at SSRN: https://ssrn.com/abstract=464102 or http://dx.doi.org/10.2139/ssrn.464102

Simon Sosvilla-Rivero (Contact Author)

UCM Institute for Economic Analysis ( email )

Carretera de Humera s/n
Madrid, Madrid 28223
Spain
+34913932626 (Phone)

HOME PAGE: http://www.ucm.es/info/ecocuan/ssr/

Francisco Perez-Bermejo

Foundation for Applied Economic Research (FEDEA) ( email )

Jorge Juan 46
Madrid, 28001
Spain
+34 91 435 04 01 (Phone)
+34 91 577 95 75 (Fax)

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