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Has the EMS changed wage and price behaviour in Europe?

Published online by Cambridge University Press:  26 March 2020

Ray Barrell
Ray Barrell*
Affiliation:
National Institute of Economic and Social Research
*
∗I would like to thank Andrew Britton, Julia Darby, Colin Donaldson, Nigel Pain and Peter Westaway at the Institute and Alex Bowen at NEDO for their help and advice in undertaking this research. This note is based on a study by Barrell, Darby and Donaldson (1990) financed by NEDO.
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Extract

Macroeconomic performance in Europe was generally agreed to have been poor in the 1970s, with high inflation and low growth. The 1980s saw a significant improvement, with inflation being reduced to under 5 per cent by the end of the decade, and growth reaching some sort of peak in 1989. There were many factors contributing to this improved performance, and the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS) has been given much of the credit. The ERM was supposed to have given the monetary authorities in France and Italy increased anti-inflationary credibility. Their decision to link their exchange rates to the D-Mark involved a commitment to follow German monetary policy and hence involved taking on German anti-inflationary credibility.

Type
Articles
Information
National Institute Economic Review , Volume 134 , November 1990 , pp. 64 - 72
Copyright
Copyright © 1990 National Institute of Economic and Social Research

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