Exchange Rate-Based Stabilization in Western Europe: Greece, Ireland, Italy and Portugal

June 1, 1997

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Enrica Detragiache, and A. J Hamann Exchange Rate-Based Stabilization in Western Europe: Greece, Ireland, Italy and Portugal, (USA: International Monetary Fund, 1997) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper compares the experience with exchange-rate–based stabilization (ERBS) of four Western European countries with that of high-inflation developing countries. In general, the behavior of key macroeconomic variables—inflation, output, demand, the real exchange rate and the current account—in the four countries examined did not correspond to the pattern observed in developing countries, although some resemblance to this pattern could be found in Italy in 1987–92 and Greece in 1994–96. The experience with ERBS in Western Europe highlights the importance of incomes policy as an ingredient of a successful stabilization program and shows that the adoption of a looser anchor does not necessarily reduce the output cost of disinflation.

Subject: Disinflation, Exchange rates, Fiscal consolidation, Fiscal policy, Foreign exchange, Inflation, Prices, Real exchange rates

Keywords: Current account, Disinflation, Exchange rate, Exchange rates, Fiscal consolidation, Inflation, Inflation country, Inflation differential, Inflation stabilization, Irish pound, Real exchange rates, Stabilization program, Western Europe, WP

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1997/075
Stock No:

WPIEA0751997
ISBN:

9781451849691
ISSN:

1018-5941

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