The EMS: Ireland's experience and prospects

Economists argue about the relative merits of fixed and floating exchange rates and, in particular, about which is more conducive to efficient stabilisation policy; most would agree, however, that exchange-rate stability is desirable. Stable exchange rates provide an environment of reduced risk for traders, encourage international trade and investment and, thereby, increase growth and employment. In the 1960s, exchange-rate stability meant fixed relationships between currencies. Today, exchange-rate stability can exist in either a fixed or a floating arrangement but has a looser connotation, i.e., that adjustments in currency relationships take place smoothly and only infrequently.