DP444 Exchange Rates, Policy Convergence and the European Monetary System
| Author(s): | Ronald MacDonald, Mark P Taylor |
| Publication Date: | August 1990 |
| Keyword(s): | European Monetary System, Exchange Rates, Policy Convergence |
| JEL(s): | 211, 431, 432 |
| Programme Areas: | International Macroeconomics |
| Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=444 |
In this paper we use a recently developed multivariate cointegration technique to analyse the degree of policy convergence of EMS member relative to that of some non-EMS countries. Interestingly, we find convergence for the nominal and real exchange rates and money supplies of the EMS members but not for the non-EMS countries. We also provide some evidence to support the `German leadership hypothesis' in the context of intra-EMS monetary policy convergence, which accords with anecdotal evidence on the modus operandi of the EMS.