The European monetary system: An evaluation

The paper evaluates a number of the claims made for the European Monetary System (EMS), which is found to have exerted a stabilizing effect on exchange rates and to have reduced the vulnerability of member bilateral rates to the movements of the dollar. The claim that the EMS represents a successful example of durable international monetary cooperation is evaluated more cautiously. The largely successful compromise achieved between counterinflation gains and the presentation of the real terms of trade between members depends on the use of capital exchange controls and a possibly unique convergence of policy priorities.