A monetary analysis of the Drachma/ECU exchange rate determination, 1980–1991

The validity of the monetary approach to the Drachma/ECU exchange rate determination is investigated through cointegration, impulse response and variance decomposition analysis. The empirical results reported confirm recent findings that the monetary approach may be interpreted as a long-run equilibrium condition with highly complex short-run dynamics. First version received: November 1997/Final version received: May 2000     

Exchange rate flexibility and the international liquidity “problem”

Contrary to the expectations of those who advocated flexible exchange rates prior to 1973, Williamson, in his study on exchange rate flexibility and reserve use, presented data which suggested “the paradoxical conclusion that reserve use actually increased following the adoption of floating”. As this finding was based on developments immediately after the final collapse of the Bretton Woods system in March 1973, there arises the question of whether it remains consistent with subsequent experience. Our author argues that the international liquidity “problem” has indeed not been resolved during the last decade and, proceeding from this conclusion, assesses its current implications.     

A framework for international monetary reform?

The European Monetary System (EMS) has, so far, proved to be a success. The regional approach to the promotion of monetary stability, in terms of both more predictable exchange rates and a reduction in inflation, is the only option available to Europe as attempts to create a new international monetary system without an inflation bias and national initiatives to reduce inflation have failed. Can the EMS, building on its success, so evolve as to facllitate the reform of the international monetary system and the permanent reduction of inflation?