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International eco: International financial institutions, Bretton woods…
International eco: International financial institutions, Bretton woods institutions Lect 20 part 1
The EU
system of international institutions, 28 European countries, started in 1957:
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The EMS from 1979-1998
exceptions: larger fluctuations (+/- 6%) for currencies of Portugal, Spain, Britain (until 1992) and Italy (until 1990):
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credit system to help out countries that needed assets and currencies to intervene in foreign exchange market
exchange rate mechanism (ERM): currencies allowed to fluctuate +/- 2.25% around target exchange rates
due to different monetary and fiscal policies: high German interest rates and excess demand for Deutschmark
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ERM redefined in 1993: bands of +/-15% around target value to allow for devaluation relative to Deutschmark
Eventually
EMS member states adopted fiscal and monetary policies as Germany
--> inflation rates in the EMS converged