Dominant interest and inflation differentials within the EMS

K.G. Koedijk, C.J.M. Kool

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

This paper investigates nominal interest and inflation behavior in the EMS between March 1979 and September 1989 using a modified version of principal components analysis. Neither over the whole period, nor after March 1983 has the EMS functioned as a Dmark-zone: deviating movements in inflation and interest rates between EMS countries still persist. Most important is the division between Germany, the Netherlands and the United Kingdom on the one hand, and Belgium, France and Italy on the other. Differences in deflationary policies between countries inside and outside the EMS appear to be the most important determinant of this result. © 1992.
Original languageEnglish
Pages (from-to)925-943
JournalEuropean Economic Review
Volume36
Issue number4
DOIs
Publication statusPublished - 1992
Externally publishedYes

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