This paper investigates the issue of monetary interdependence among members of the European Monetary System over the period 1979–91 and the leadership role attributed to the German central bank in the process of monetary integration, and looks for possible changes in central banks’...

This paper extends recent work by Feldstein and Horioka (1980) and Bayoumi (1990), and examines saving-investment correlations for industrial countries in the post-war period. The focus of the enquiry is on differences observed between EMS and non-EMS countries. It is seen that the EMS countries...

A simple two-country stochastic model is used to analyze monetary policy interaction in a system of exchange rate bands such as the EMS, in the context of internationally-integrated financial markets. We consider the widely-acknowledged asymmetry of the system, as it pertains to member...

We study empirically daily French and German interest rate changes since the Basle-Nyborg agreement of September 1987. In particular, we ask whether the shock associated with German unification altered the degree of leadership of German monetary policy in the ERM. We conclude that Germany’s...

A common rationale for EMS membership is that it enhances the credibility of a central bank’s commitment to stable monetary growth. In this paper we consider this idea in the light of two features of the system, namely, the existence of exchange rate bands and the prevalence of capital...

We study the transmission of monetary shocks across euro-area countries using a dynamic factor model and high-frequency identification. We develop a methodology to assess the degree of heterogeneity, which we find to be low in financial variables and output, but significant in consumption,...

With the advent of the economic and monetary union in the European Union (EU), the economic landscape of the EU will bear a striking resemblance to that of the United States in terms of fundamental attributes such as the freedom of internal movements of individuals, capital, and goods within the...

We present a model of a “soft” exchange rate target zone and interpret it as a stylized description of the post-August 1993 ERM. Our central bank targets a moving average of the current and past exchange rates, rather than the exchange rate’s current level, thus allowing the rate to move...