Exchange Rate-Based Stabilization in Western Europe: Greece, Ireland, Italy and Portugal

29 Pages Posted: 15 Feb 2006

See all articles by Enrica Detragiache

Enrica Detragiache

International Monetary Fund (IMF) - European Department

A. Javier Hamann

International Monetary Fund (IMF) - Independent Evaluation Office

Date Written: June 1997

Abstract

This paper compares the experience with exchange-rate-based stabilization (ERBS) of four Western European countries with that of high-inflation developing countries. In general, the behavior of key macroeconomic variablesinflation, output, demand, the real exchange rate and the current accountin the four countries examined did not correspond to the pattern observed in developing countries, although some resemblance to this pattern could be found in Italy in 1987-92 and Greece in 1994-96. The experience with ERBS in Western Europe highlights the importance of incomes policy as an ingredient of a successful stabilization program and shows that the adoption of a looser anchor does not necessarily reduce the output cost of disinflation.

Keywords: Inflation stabilization, Western Europe

JEL Classification: E31, F41

Suggested Citation

Detragiache, Enrica and Hamann, Alfonso Javier, Exchange Rate-Based Stabilization in Western Europe: Greece, Ireland, Italy and Portugal (June 1997). IMF Working Paper, Vol. , pp. 1-29, 1997. Available at SSRN: https://ssrn.com/abstract=882357

Enrica Detragiache (Contact Author)

International Monetary Fund (IMF) - European Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Alfonso Javier Hamann

International Monetary Fund (IMF) - Independent Evaluation Office ( email )

700 19th St. NW
Washington, DC 20431
United States

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