Monetary Policy Interaction within the EMS

40 Pages Posted: 15 Feb 2006

See all articles by Daniel Gros

Daniel Gros

Centre for European Policy Studies, Brussels; CESifo (Center for Economic Studies and Ifo Institute)

Timothy Lane

International Monetary Fund (IMF) - Policy Development and Review Department

Date Written: January 26, 1989

Abstract

A simple two-country stochastic model is used to analyze monetary policy interaction in a system of exchange rate bands such as the EMS, in the context of internationally-integrated financial markets. We consider the widely-acknowledged asymmetry of the system, as it pertains to member countries` use of monetary policy to offset shocks that impinge on their national incomes. Our results suggest, among other things, that tightening the exchange-rate bands would lead to more intervention by all members, even if formal responsibility for keeping exchange rates within the bands lay only with the peripheral countries.

JEL Classification: 1331, 3116, 4314, 4320

Suggested Citation

Gros, Daniel and Lane, Timothy, Monetary Policy Interaction within the EMS (January 26, 1989). IMF Working Paper No. 89/8, Available at SSRN: https://ssrn.com/abstract=884554

Daniel Gros (Contact Author)

Centre for European Policy Studies, Brussels ( email )

1 Place du Congres
B-1000 Brussels, 1000
Belgium

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Timothy Lane

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Washington, DC 20431
United States
202-623-7648 (Phone)
202-623-4405 (Fax)

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