European exchange rate mechanism

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European exchange rate mechanism (ERM)

The system that countries in the European Union once used to pay exchange rates within bands around an ERM central value.
References in periodicals archive ?
Individual European countries in the Eurozone or in the ERM II inherently give up the opportunity to influence their terms-of-trade through nominal exchange rate undervaluation, though they still have the ability to influence their international competitiveness via declines in domestic prices and wages.
Because of its ERM II participation, Hungary has been also forced to defend the trading band of the forint.
Two of the countries (Estonia and Slovenia) have already joined the ERM II and, judging from current information, they will be in a good position to adopt the euro in the minimum required time (i.
The initial goal of the Government was to submit its application documents for membership in the ERM II in November 2009.
When in the ERM II, the main risks are connected with asymmetric demand boom, accommodated by an excessive credit expansion.
Nonetheless, as evidenced by Figure 4, the Polish zloty-euro rate has become volatile in a way not compatible with the philosophy of ERM II.
Although the intention of this move was to prevent further speculation of future appreciation of the currency, markets recognised it as a shift in monetary policy to support a weaker ERM II central parity.
The Estonian government and the central bank intend to seek participation in the ERM II exchange rate mechanism soon after joining the EU, in accordance with all relevant multilateral procedures and within the established framework.
However, the entrants will be held to rigid requirements of low inflation and a minimum ratio of the consolidated fiscal budget deficit to gross domestic product (GDP), certainly once they approach eventual accession to monetary union by joining the new Exchange Rate Mechanism or ERM II.
Hence, in addition to concentrating on stabilizing inflation and interest rates at low levels, introducing the ERM II and consolidating fiscal balances, economic policies will also need to focus on real convergence, structural adjustment, and increasing flexibility.
Goranov argued that it was possible to join ERM II by 2018, when the term in office of the current government was set to expire.
In particular, member states of the eurozone or ERM II should pursue an annual adjustment in cyclically adjusted terms, net of one-off and other temporary measures, of 0.