Exchange Rate Mechanism


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Exchange Rate Mechanism (ERM)

The methodology by which members of the EMS maintain their currency exchange rates within an agreed-upon range with respect to other member countries.

Exchange Rate Mechanism

Used prior to the adoption of the euro, a method for reconciling differing exchange rates between currencies, allowing participation in the single European currency. Established in 1979, it was known as a "semi-pegged" system in which currencies were variable with respect to each other only within a certain range. After the introduction of the euro in 1999, the exchange rate mechanism was replaced by ERM II, which reconciles exchange rates for countries wishing to join the eurozone.

exchange rate mechanism (ERM)

see EUROPEAN MONETARY SYSTEM.
References in periodicals archive ?
The Central Bank begins a new exchange rate mechanism for the pound which will allow it to fluctuate within a narrow band set by the bank.
George Soros made millions on currency speculation which effectively forced Britain out of the European Exchange Rate Mechanism. His philanthropic activities, including the funding of this publishing venture, have been branded by extreme right-wing nationalists of the Zhirinovski camp as American propaganda.
The variable [A.sub.i] is agricultural employment, which is defined as the proportion of each region's employed population that works in agriculture; [ERM.sub.i] is a slope dummy with a unitary value reflecting national membership in the Exchange Rate Mechanism (ERM), and [N.sub.q] is a vector of q-country dummies with Denmark the omitted country.
The breakdown of the Exchange Rate Mechanism of the European Monetary System in 1992 was a particularly striking case of trying to lock exchange rates together when comparable economic forces were not close to being identical among the countries.
I can only imagine what kind of superficial and boring coverage Europe's currency crisis and the collapse of the Exchange Rate Mechanism got.
Until August 2, the participants in the Exchange Rate Mechanism were so tied together that the variations in their currencies were limited to a maximum of 4.5 percent.
Tight money policies to keep the lid on inflation were exported from Germany to the rest of Europe via the exchange rate mechanism linking European Community (EC) currencies.
He pointed out that the commercial register breakdown comes at a time when the Bulgarian government makes commitments to EU partners for the preparation for the currency exchange rate mechanism, which implies strengthened supervision over insurers and pension funds, enhanced transparency and anti-corruption measures and measures for effective management of state-owned enterprises.
Finance ministers of the euro area member states and the European Central Bank (ECB) said that Bulgaria could simultaneously join the Exchange Rate Mechanism (ERM II) and the banking union after a positive assessment by the ECB.
Two of these Member States, Bulgaria and Croatia, fulfil all of the convergence criteria, except for the exchange rate criterion as they are not members of the Exchange Rate Mechanism (ERM II).
Wang said that China's exchange rate mechanism has become more market-oriented and transparent which led to higher volatility for the yuan.
It is almost as large as the devaluation triggered by Black Wednesday in 1992, when the pound plunged by 19% after leaving the Exchange Rate Mechanism.