Revisiting the European Monetary System Experience: Were Some Members More Equal than Others? |
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Authors: | Lorenzo,Bini Smaghi &ndash Giovanni,Ferri &dagger &Dagger |
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Affiliation: | Executive Board, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt, Germany;Department of Economics, University of Bari, Via Camillo Rosalba 53, 70124 Bari, Italy. |
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Abstract: | Difficulties in implementing effective liquidity support – to counter speculative attacks – may partly explain why regional exchange rate agreements crawl regional trade integration. Our novel analysis of the European Monetary System confirms that liquidity support was provided under the discretion of the anchor country (Germany), and was indeed asymmetric across member countries and/or periods. In particular, it was less forthcoming (i) to countries further away from Germany (less politically influential there), (ii) to larger countries (interfering more with the Bundesbank's monetary control) and (iii) during periods when German inflation accelerated (and the Bundesbank needed a firmer grip on liquidity). |
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Keywords: | E58 E52 F33) |
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