Promoting Economic Integration by the EMS?

In 1979, the European Community established the European Monetary System (EMS) in order to achieve a “greater measure of monetary stability”, to “facilitate economic convergence” and to “give the process of European integration new momentum” ( European Fund for Monetary Cooperation 1985). This approach was based on the assumption that economic integration can be promoted by stabilizing exchange rates. In the recent debate on the Maastricht treaty similar arguments linking exchange rate stability and economic integration have been advanced (e.g., Emerson et al. 1991; Baldwin 1991). Stable exchange rates between EU currencies are said to be necessary to fully reap the gains of the internal market and to achieve further integration of the capital and goods markets. 1 Therefore, the evaluation of the EMS experience, while being of great interest in itself, can also give some evidence of the possible effects of the European Monetary Union for the European Economic Union. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.