Year:    1979

Author:    Hiss, Dieter

Credit and Capital Markets – Kredit und Kapital, Vol. 12 (1979), Iss. 3 : pp. 354–362

Abstract

On the Status of the European Monetary System within the World Monetary System

The establishment of the European Monetary System is attributable - like GATT and the IMF in the past - primarily to political and not to economic motives: The EMS, the new brace that is expected to create better preconditions for economic growth and internal price stability, is intended to strengthen the political coherence of the member countries and make further integration progress possible. The aim of this is to enable Europe to play a role consonant with its economic importance even in a changed field of world political forces. The parity-grid of the EMS can be regarded as a subsystem of the international monetary system within the range of latitude for selecting exchange rate systems provided by the revised IMF agreement. The founders of the EMS have expressly declared their acceptance of the commitments laid down in the IMF agreement with respect to exchange rate arrangements. For example, the EMS credit facilities are intended to contribute in case of need only towards bridging the period necessary to regain balance-of-payments equilibrium by applying economic policy measures. Also exchange rate changes - guiding maxim: fixed but adjustable - are definitely provided for in the event of disequilibria. Towards third countries, the EMS members pursue an exchange rate policy of co-ordinated floating in accordance with the IMF statutes. But also within the parity grid, the members orient themselves to the IMF principles of exchange rate policy. Thus the analysis shows that the EMS complies with the rules which also apply to the worldwide monetary system.