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Topic: European Exchange Rate Mechanism

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	Exchange Rate Mechanism - MSN Encarta
		Exchange Rate Mechanism (ERM), arrangement entered into in March 1979 whereby most members of the European Monetary System (EMS) that was established at the same time agreed to limit the fluctuations of their bilateral exchange rates.
		The exchange rates of the participating countries of the EMS were formally defined with reference to the ECU (though in practice the mark has been the fulcrum of the system).
		The basic underlying idea was that a fixed exchange rate with Germany would have a favourable effect on inflationary expectations and therefore reduce wage demands.
	uk.encarta.msn.com /encyclopedia_761580149/Exchange_Rate_Mechanism.html (1099 words)

	NationMaster - Encyclopedia: European Exchange Rate Mechanism
		Before the introduction of the euro, exchange rates were based on the ECU, the European unit of account, whose value was determined as a weighted average of the participating currencies.
		On 31 December 1998, the ECU exchanges rates of the Eurozone countries were frozen and the value of the euro, which then superseded the ECU at par, was thus established.
		On December 31, 1998, the ECU exchanges rates of the Eurozone countries were frozen and the value of the Euro, which then superseded the ECU on a 1:1 basis, was thus established.
	www.nationmaster.com /encyclopedia/European-Exchange-Rate-Mechanism (5162 words)

	Lecture Twenty One
		A fiscal expansion rates shifts the IS* curve outwards on the Y-e diagram, producing higher exchange rate, no change in output, and a fall in the balance of trade.
		An increase in the foreign interest rate r* (a) moves the IS* curve to the left and (b) moves the LM* curve to the right, so lowers the exchange rate, boosts output, and leads to a rise in the balance of trade.
		And as the exchange rate rises, the IS curve shifts in and to the left because the trade balance deteriorates.
	econ161.berkeley.edu /Teaching_Folder/Econ_100b_S96/Lectures/lecturetwentyone.html (865 words)

	European Exchange Rate Mechanism - Wikipedia, the free encyclopedia
		Before the introduction of the Euro, exchange rates were based on the ECU, the European unit of account, whose value was determined as a weighted average of the participating currencies.
		A grid (known as the Parity Grid) of bilateral rates was calculated on the basis of these central rates expressed in ECUs, and currency fluctuations had to be contained within a margin of 2.25% either side of the bilateral rates (with the exception of the Italian lira, which was allowed a margin of 6%).
		On December 31, 1998, the ECU exchanges rates of the Eurozone countries were frozen and the value of the Euro, which then superseded the ECU on a 1:1 basis, was thus established.
	en.wikipedia.org /wiki/European_Exchange_Rate_Mechanism (499 words)

	Wall $treet Week with FORTUNE . Resources \| PBS
		Exchange rate at which demand for a currency is equal to the supply of the currency in the economy.
		The variability of a firm's value that results from unexpected exchange rate changes, or the extent to which the present value of a firm is expected to change as a result of a given currency's appreciation or depreciation.
		Offsetting exposures in one currency with exposures in the same or another currency, when exchange rates are expected to move in such a way that losses or gains on the first exposed position should be offset by gains or losses on the second currency exposure.
	www.pbs.org /wsw/resources/bfglose.htm (7027 words)

	EU Facts: European Monetary System
		However, European leaders were keen to maintain the principle of stable exchange rates rather than moving to the policy of floating exchange rates that was gaining popularity in the USA.
		Fixing exchange rates is dangerous because unless the correct rate is set and changed appropriately, a national economy can be forced to pursue policies that are not best suited to domestic conditions simply in order to maintain international stability.
		Exchange Rate: the ratio in which one country's currency is valued against another.
	www.civitas.org.uk /eufacts/FSECON/EC9.htm (711 words)

	1990-1992: Britain and the politics of the European exchange rate mechanism \| libcom.org
		This understanding of the politics of exchange rates was well captured by Robert Triffin who argued, in the 1970s, that the return to at least locally fixed exchange rates in Europe after the breakdown of the Bretton Woods system, was an attempt to create a situation where local attacks on the working class (e.g.
		Rather than forcing inflation rates to converge downward to the German rate, fixed exchange rates were seen to widen the gap between countries at the expense of 'weaker' countries.
		As exchange rate volatility increased and dollar exports weakened, it became apparent that the pound's continued membership of the ERM depended on further interest rate rises at a time of deep recession, consigning the UK's manufacturing and construction industries to further decline and job loss and reinforcing financial pressures on personal debtors.
	libcom.org /library/britain-european-exchange-rate-mechanism (11744 words)

	SCADPlus: Exchange rate mechanism (ERM II) between the euro and participating national currencies
		The single market must not be endangered by real exchange rate misalignments or by excessive nominal exchange rate fluctuations between the euro and the other EU currencies, as these would disrupt trade flows between the Member States.
		The decision to reduce the fluctuation band must be taken in accordance with the procedure laid down in paragraph 2.4 of the European Council Resolution on the establishment of an exchange-rate mechanism in the third stage of economic and monetary union (Amsterdam, 16 June 1997) [ FR ].
		In accordance with the European Council Resolution on the establishment of an exchange-rate mechanism in the third stage of economic and monetary union (Amsterdam, 16 June 1997), a new exchange rate mechanism (ERM II) replaced the European Monetary System (EMS) on 1 January 1999.
	europa.eu /scadplus/leg/en/lvb/l25082.htm (1620 words)

	FT.com - Special Reports / Euro
		Stage 3: January 1 1999 onwards with the transfer of monetary policy to the Eurosystem, irrevocable fixing of exchange rates between the currencies of the participating EU member states and the introduction of the euro.
		European Commission: The body responsible for initiating legislation and administering the day-to-day running of EU policy, made up of 20 commissioners (two nationals from Germany, Spain, France, Italy and the UK and one representative from the other member states) and about 27,000 subsidiary staff organised into directorates-general and specialised departments.
		European Council: Is the EU's main decision-making body and brings together the heads of state or government of the member states and the president of the European Commission.
	specials.ft.com /euro/FT3W5HX68UC.html (1615 words)

	Tutor2u - fixed and floating exchange rates
		In a fixed exchange rate system, the government (or the central bank acting on the government's behalf) intervenes in the currency market so that the exchange rate stays close to an exchange rate target.
		Fixed rates provide greater certainty for exporters and importers and under normally circumstances there is less speculative activity - although this depends on whether the dealers in the foreign exchange markets regard a given fixed exchange rate as appropriate and credible.
		Fixed exchange rates can exert a strong discipline on domestic firms and employees to keep their costs under control in order to remain competitive in international markets.
	www.tutor2u.net /economics/content/topics/exchangerates/fixed_floating.htm (1320 words)

	Sveriges Riksbank/Riksbanken - Glossary
		European Economic and Monetary Union; the third and final stage started on 1 January 1999, when the exchange rates of currencies in the euro area were irrevocably locked and responsibility for monetary policy was transferred from the national central banks to the ECB.
		Rate determined in the market by the demand for and supply of the currency in question; also called a variable exchange rate.
		The reference rate is determined by the Riksbank semi-annually and is based on the repo rate that applies at the end of the past six months rounded up to the nearest whole or half percentage point.
	www.riksbank.com /templates/Page.aspx?id=9108 (1301 words)

	Economic and Monetary Union - Wikipedia, the free encyclopedia (Site not responding. Last check: )
		The 10 new countries that acceded to the European Union in 2004 all intend to join third stage of the EMU in the next ten years, though the precise timing depends on various economic factors.
		The European Monetary Institute is established as the forerunner of the European Central Bank, with the task of strengthening monetary cooperation between the member states and their national banks, as well as supervising ECU banknotes.
		On 1st June 1998, the European Central Bank (ECB) is created, and in 31 December 1998, the conversion rates between the 11 participating national currencies and the euro are established.
	www.americancanyon.us /project/wikipedia/index.php/Economic_and_Monetary_Union (691 words)

	Exchange Rate Mechanism - Hutchinson encyclopedia article about Exchange Rate Mechanism
		System established in 1979 for controlling exchange rates within the European Monetary System of the European Union (EU) that was intended to prepare the way for a single currency.
		If a currency deviated significantly from the central ECU rate, the European Monetary Cooperation Fund and the central banks concerned stepped in to stabilize the currency.
		The ERM was revised from 1 January 1999, with the launch of the single European currency (euro), and Greece and Denmark became members of ERM II (a structure linking the currencies of some non-participating member states to the euro).
	encyclopedia.farlex.com /Exchange+Rate+Mechanism (226 words)

	ECB: Conventions and Procedures for the Exchange Rate Mechanism II (ERM II)
		Exchange rate policy cooperation may be further strengthened, for example by allowing closer exchange rate links between the euro and other currencies in ERM II where, and to the extent that, these are appropriate in the light of progress towards convergence.
		For all the currencies of the non-euro area Member States participating in ERM II, the exchange rate for the bilateral central rate against the euro is quoted using the euro as the base currency.
		The intervention rates are determined by adding or subtracting the agreed bandwidth, expressed as a percentage, to or from the bilateral central rates.
	www.ecb.int /press/pr/date/2004/html/pr040628_1.en.html (551 words)

	CEF 1997: Time-Varying Risk of Realignment in the European Rate Mechanism: A Comparison of Linear and Nonlinear ...
		In the economic literature on exchange rate target zones, Krugman (1991) argues that currency bands are perfectly credible, such that no [central parity] zone exchange rates in the Exchange Rate Mechanism (ERM) of the European Union (EU).
		Svensson, in his 1993 European Economic Review paper, "Assessing Target Zone Credibility", argues that interest rate differentials are a "naive" measurement of devaluation expectations for a currency with an exchange rate realignments are expected.
		By using this interest rate adjustment mechanism, Svensson is able to considerably improve measurements of devaluation expectations for a currency with an exchange rate band over a 3- and 12-month time horizon.
	bucky.stanford.edu /cef97/abstracts/bauer.html (1238 words)

	AEI - Short Publications - A Single Money for Europe?
		The breakaway from the straight jacket of the European exchange rate mechanism in September 1992 by the United Kingdom, Spain, and Italy has led to far superior economic performance in those countries, with moderating inflation.
		The actual desires of Germans regarding European monetary union and the implied future course of economic policy in Germany will be able to find expression in a series of German elections during 1998 that culminate with the election contest for chancellor in October.
		For Italy, Spain, and the United Kingdom, countries that departed from the exchange rate mechanism in 1992, performance is closer to that of France and Germany, with Spain and the United Kingdom experiencing only about 2 percent increases in employment while Italian employment has actually fallen about 7 percent.
	www.aei.org /publications/pubID.7820/pub_detail.asp (2995 words)

	United Press International - Business(p) - Currency speculators and the new EU (Site not responding. Last check: )
		On the sidelines of the European Bank for Reconstruction and Development's annual meeting in London earlier this month, the Hungarian born international financier had everybody's attention with a warning for the 10, mainly former communist countries, set to join the European Union next week.
		He said they should spend as little time as possible in the European Exchange Rate Mechanism (ERM-2) before joining the euro, arguing that their currencies could be vulnerable to speculative attack.
		Most of the European Union accession states are keen to adopt the euro as fast as possible, although it is unlikely that many will get in until the end of the decade.
	www.upi.com /view.cfm?StoryID=20040425-095950-9708r (1273 words)

	Lecture Twenty Two
		The higher is the exchange rate e, the higher are domestic interest rates--and so the LM* curve is upward sloping...
		The higher is the exchange rate e, the higher are domestic interest rates--and the lower is investment.
		So the rise in foreign interest rates pulls the IS* curve down and to the left, and also pushes the e* curve, the equilibrium long-run exchange rate line, downward.
	econ161.berkeley.edu /Teaching_Folder/Econ_100b_S96/Lectures/lecturetwentytwo.html (1191 words)

	ARTICLE ARCHIVE--European Currencies
		When investors are free to choose among assets denominated in different currencies, the rates of return they expect to receive for comparable degrees of risk cannot vary too far from one currency to another.
		Thus interest rates on franc-denominated assets would have to rise above the interest rate on deutsche mark assets to prevent sustained flows of capital out of franc assets and into deutsche mark assets.
		In the United Kingdom, where output had declined by more than 4 percent from its previous peak and the unemployment rate had topped 10 percent, pressure increased to realign or to drop out of the EMS so that interest rates could be lowered.
	college.hmco.com /economics/taylor/complete/general/articles/artic_eur_cur.html (669 words)

	[No title]
		However, in the second half of the 1990s, the deadlines for the European Union will be crowding in, what with the adaptation of the institutions, the renegotiation of budget arrangements, and the broadening of membership to the countries of Central and Eastern Europe, the practical manifestation of a common European foreign policy.
		1 August 1993 Significant broadening of the margins of fluctuation of the European Exchange Rate Mechanism.
		In particular, it was under France's chairmanship that a compromise was reached on the British budget contribution, at the European Council held in Fontainebleau in June 1984.
	www.unesco.org /mitterrand/anglais/ieuroues.htm (1668 words)

	SCADPlus: European Council Resolution on the new exchange-rate mechanism
		The European Council intends to establish a suitable exchange-rate system in order to guarantee exchange-rate stability and solidarity between the euro and the national currencies of those countries not participating in the euro area from the outset.
		European Council Resolution on the establishment of an exchange-rate mechanism in the third stage of economic and monetary union (Amsterdam, 16 June 1997) [Official Journal C 236 of 02.08.1997]
		The euro will be the centre of the new mechanism, whose operating procedures will be laid down in an agreement between the European Central Bank (ECB) and the national central banks of the Member States outside the euro area.
	europa.eu /scadplus/leg/en/lvb/l25024.htm (562 words)

	ECB: Conventions and procedures for the new Exchange Rate Mechanism (ERM II)
		The exchange rate mechanism will help to ensure that non-euro area Member States participating in the mechanism orient their policies towards stability, foster convergence and thereby help them in their efforts to adopt the euro.
		In line with the Resolution of the European Council, exchange rate policy co-operation may be further strengthened, for example by allowing closer exchange rate links between the euro and other currencies in the exchange rate mechanism, where, and to the extent that, these are appropriate in the light of progress towards convergence.
		For all the currencies of the non-euro area Member States participating in ERM II, the exchange rate for the bilateral central rate vis-à-vis the euro will be quoted using the euro as the "base" currency.
	www.ecb.eu /press/pr/date/1998/html/pr980912_3.en.html (591 words)

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