Discussion paper

DP444 Exchange Rates, Policy Convergence and the European Monetary System

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.

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Citation

Taylor, M and R MacDonald (eds) (1990), “DP444 Exchange Rates, Policy Convergence and the European Monetary System”, CEPR Press Discussion Paper No. 444. https://cepr.org/publications/dp444