POLI 243 Chapter Notes - Chapter 24: Deflation, German Federal Bank, Maastricht Treaty
13 May 2013
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Document Summary
Exchange rates cause economic and financial disruptions so to create stability countries in. Six original members of european common market decided to retain a kind of stable exchange rate within a band of plus or minus 2. 25 per cent aka the snake. European monetary system (ems) constructed out of the snake who later enacted w/ its. Exchange rate mechanism (erm) where they pledged to maintain currencies in plus or minus. 2. 25 per cent band, & currencies anchored to a basket composed of participating currencies. Each currency had to fix its value against a single basket of currencies rather than against each other individually. Ecu- an attempt to create a single currency representing in practice the basket to which each individual currencies was fixed; but it was never issued thus it never had intended impact. As a basket currency, ecu was comprised of parts of each of the member"s currencies thus asymmetries within the system persisted.
