Managing currency bands and the future of European monetary integration

Abstract

In late July 1993, the European Monetary System threatened to unravel. The Exchange Rate Mechanism (ERM), which ties European Community members′ currencies together, faced the possibility of collapse as the French franc and other currencies pushed perilously close to the permissible bounds of fluctuation despite massive intervention by central banks. Similar conditions had forced the British pound sterling and Italian lira out of the ERM in September 1992. The short‐term resolution of the crisis was the decision to widen the permissible bounds of fluctuation. Examines the events leading to the ERM crisis, and the implications of the crisis and its resolution on the future of European economic integration are also examined. Finally, discusses the likely future of European economic and monetary union given the current economic and political climate of member countries.

Citation

Abu‐Rashed, J., Cameron, L. and Rankin, C.H. (1995), "Managing currency bands and the future of European monetary integration", Management Decision, Vol. 33 No. 2, pp. 22-30. https://doi.org/10.1108/00251749510081692