Macroeconomics stability and currency regimes. Lessons from europe for Latin America

Abstract

THE EUROPEAN MONETARY SYSTEM (EMS) WAS ESTABLISHED IN EUROPE IN 1979 AND HAS BEEN WORKING UNTIL 1998 THROUGH THE FIXED (STABLE BUT ADJUSTABLE) PARITIES OF THE EXCHANGE RATE MECHANISM (ERM). THE MOST WIDELY SHARED DEFINITION OF THIS AGREEMENT IS THAT A CONSENSUS WAS REACHED IN EUROPE TO GET RID OF THE COMPETITIVE DEVALUATION´S OF THE SEVETIES AND TO SWITCH TO FIXED EXCHANGE RATES AS AN ”ENGINE FOR DISINFLATION”, IN ORDER TO CREATE AN AREA WHICH COULD BENEFIT FROM THE ”PUBLIC GOOD” OF MONETARY STABILITY.