Chapter I. The Home Economy

1990 ◽  
Vol 132 ◽  
pp. 9-24
Keyword(s):  
Interest Rate ◽  
European Monetary System ◽  
European Monetary ◽  
Full Member ◽  
Monetary System ◽  
Official Position ◽  
The Uk ◽  
The Right

Since last November we have based our forecasts on the assumption that the UK will soon become a full member of the European Monetary System. There has been no change in the official position on entry to confirm or correct that assumption, but recent hints and rumours make clear that it is the right assumption to make. We retain it for this forecast. The actual date of entry is now more likely to be in the first half of next year; a fall in the rate of inflation is seen as a precondition, and it is one which may not now be fulfilled as soon as we had hoped. We assume that some announcement on the ERM is made about the end of the year, permitting an interest-rate cut in the first quarter, followed by formal accession by the second quarter, about the time of the Budget.

Chapter I. The Home Economy

1990 ◽  
Vol 131 ◽  
pp. 6-23
Keyword(s):  
Market Exchange ◽  
Full Membership ◽  
Full Member ◽  
Market Exchange Rate ◽  
The Government ◽  
Run Up ◽  
The One ◽  
The Uk ◽  
The Right

The probability has increased that the UK will become a full member of the EMS before the next general election. The issue is by no means settled, but full membership now seems the right assumption to make for the forecast. The precise timing is difficult to foresee: on the one hand the present economic situation in this country makes an immediate move difficult, on the other hand the Government might be loath to make the move in the run-up to the election. Fortunately the choice of the exact date is not very material to the forecast. We have assumed the fourth quarter of the year is the date of entry. A more important question concerns the terms on which the UK joins: whether sterling joins at the market exchange rate of the day and the width of the band within which it can fluctuate.

Europe's monetary malaise: international institutions and domestic policy commitments

1996 ◽  
Vol 22 (3) ◽  
pp. 257-273 ◽  
Author(s):  
Wayne Sandholtz
Keyword(s):  
Exchange Rate ◽  
International Institutions ◽  
European Monetary System ◽  
Central Banks ◽  
European Monetary ◽  
Exchange Rate Mechanism ◽  
Monetary System ◽  
The Uk ◽  
Belgian Franc ◽  
Rate Mechanism

A yearlong nightmare for the European Monetary System (EMS) began in September 1992. Amid name–calling, finger–pointing, and hand–wringing, the British pound and the Italian lira dropped out of the Exchange Rate Mechanism (ERM). In succeeding months, virtually every other ERM currency came under attack.1 Three of them—the Spanish peseta, the Portuguese escudo, and the Irish punt—devalued within the system. Three others—the French franc, the Belgian franc, and the Danish krone—avoided devaluation, but only at the price of recurrent and costly rounds of intervention by multiple central banks. Finally, in August 1993, the defenders of the parities surrendered. The twelve EMS countries agreed to expand the fluctuation margins from 2.25 per cent on either side of parity (6 per cent for Spain, Portugal and the UK) to 15 per cent on either side of parity. The wider margins eliminated the potential for speculative attacks, but left the system only the thinnest veneer of exchange rate coordination. This article seeks not to assess the causes of the crisis but rather to explain why the EMS governments did not defuse it with a realignment—the mechanism built into the ERM for precisely such occasions.

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