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- Title
Revisiting the European Monetary System Experience: Were Some Members More Equal than Others?
- Authors
Smaghi, Lorenzo Bini; Ferri, Giovanni
- Abstract
Difficulties in implementing effective liquidity support – to counter speculative attacks – may partly explain why regional exchange rate agreements crawl regional trade integration. Our novel analysis of the European Monetary System confirms that liquidity support was provided under the discretion of the anchor country (Germany), and was indeed asymmetric across member countries and/or periods. In particular, it was less forthcoming (i) to countries further away from Germany (less politically influential there), (ii) to larger countries (interfering more with the Bundesbank's monetary control) and (iii) during periods when German inflation accelerated (and the Bundesbank needed a firmer grip on liquidity).
- Subjects
GERMANY; MONETARY systems; MONETARY policy; FOREIGN exchange rates; MONETARY unions
- Publication
Economic Notes, 2006, Vol 35, Issue 2, p151
- ISSN
0391-5026
- Publication type
Article
- DOI
10.1111/j.1468-0300.2006.00162.x