Net international capital movements entail equivalent net resource transfers. Arbitrage in perfectly integrated finan-cial markets instantaneously eliminates yield differentials through valuation adjustments. But the stock adjustments that constitute the essence of net capital movements may also...

This paper looks at whether the aggregate ERM money supply has been a useful predictor of short-term changes in inflation and growth, and long-term trends in price levels among the core ERM countries. The evidence suggests that over the period since 1987, when there have been no realignments,...