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EXCHANGE RATE‐BASED STABILIZATION IN WESTERN EUROPE: GREECE, IRELAND, ITALY, AND PORTUGAL
Author(s) -
DETRAGIACHE ENRICA,
HAMANN A. JAVIER
Publication year - 1999
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/j.1465-7287.1999.tb00688.x
Subject(s) - exchange rate , inflation (cosmology) , economics , abandonment (legal) , international economics , monetary economics , political science , physics , theoretical physics , law
This paper reviews the experience with exchange rate‐based stabilization of four Western European countries–Italy, Ireland, Portugal, and Greece–in 1980–1996 and compares it with the experience of high‐inflation developing countries. We find that inflation stabilization was contractionary, in contrast with the expansionary cycle observed in high‐inflation countries, although some real exchange rate appreciation took place. Also, frequent adjustments of the exchange rate peg or even its abandonment did not lead to a resumption of inflation, so stabilization programs were successful in all four countries. ( JEL E31, F41)