Exchange Rate-Based Stabilization in Western Europe: Greece, Ireland, Italy and Portugal
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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.
Series:
Working Paper No. 1997/075
Subject:
Disinflation Exchange rates Fiscal consolidation Fiscal policy Foreign exchange Inflation Prices Real exchange rates
English
Publication Date:
June 1, 1997
ISBN/ISSN:
9781451849691/1018-5941
Stock No:
WPIEA0751997
Pages:
29
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