This study is concerned with the determinants of monetary policy in the ERM countries.We derive a monetary policy rule, an interest rate rule, from a minimization problem faced by the central bank. The loss fuction trades off costs of interest rate instability against benefits from successful...

The purpose of this study is to analyze realignment expectations in the exchange rate mechanism of the European Monetary System (EMS), in particular with reference to the five year period (1987-1992) during which no realignments were done.The period chosen for this study provides us an...

This study is concerned with the determinants of monetary policy in the ERM countries. We derive a monetary policy rule, an interest rate rule, from a minimization problem faced by the central bank. The loss function trades off costs of interest rate instability against benefits from successful...