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Title: The Prospect of a Depreciating Dollar and Possible Tension Inside the EMS

Author(s): Jacques Melitz

Publication Date: March 1986

Keyword(s): Dollar Depreciation, European Monetary System and Policy Conflict

Programme Area(s): International Macroeconomics

Abstract: The depreciation of the dollar can lead to conflict within the European Monetary System. In order to develop this theme, I assume that the preferences of German policy-makers are more strongly anti-inflationary than those of the French. This means that the depreciation of the dollar will suit the Germans better than the French. Consequently, a dilemma can arise, wherein no possible realignment can resolve the conflict between France and Germany. Only a return to the conditions of the "snake" will do. That is, France may need to accept a situation where it bears exclusive responsibility for defending the jointly determined parity. But it may not be in the interests of the French nor even, possibly, those of the Germans for France to do so.

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Bibliographic Reference

Melitz, J. 1986. 'The Prospect of a Depreciating Dollar and Possible Tension Inside the EMS'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=97