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Financial Markets and
European Monetary Cooperation
A blend of theoretical and
policy-oriented analysis, this book provides a comprehensive assessment of the causes and
implications of the 1992-93 crisis of the exchange rate mechanism of the European
monetary system. Cogent factual presentation - including new details on the crisis -
original theoretical analysis, and an interpretation rooted in the theory, make this
treatment essential reading to understand the process toward economic and political
integration in Europe. The authors first sketch the history of monetary cooperation in
Europe from Bretton Woods to Maastricht. A step-by-step account of the 1992-93 events
follows, including a discussion of the extent to which financial markets anticipated the
crisis. A survey of the recent literature on the subject introduces the authors'
center-periphery model of currency crisis. The authors argue that the vulnerability of
Europe to financial crisis was - and still is - the result of the lack of concern with the
systemic dimensions of monetary policy-making.
Contents
1. Introduction
2. Exchange rate stability in
Europe: a historical perspective
3. The unfolding of the 1992-93
ERM crisis
4. Financial markets and ERM
credibility
5. Modelling currency crisis
6. A center-periphery model
7. Unilateral pegs and escape
clauses: the role of domestic credibility
8. Policy coordination and
currency crisis
9. What causes the system to
crumble
10. Rebuilding the system:
what next?
223 pages