Describe the advantages and disadvantages of the uk erm

Assignment Help International Economics

Reference no: EM13239119

The UK entered the European Exchange Rate Mechanism (ERM) in October 1990 at 2.95 Deutsche mark per pound and agreed to keep the pound within a range of ±6% against other member currencies of the ERM. Under the ERM, if the exchange rate ever neared the bottom of its permitted range, 2.778 Deutsche mark per pound, the UK government would be obliged to intervene. In 1991-92, the UK economy was suffering from a severe recession. During the fall of 1992, the British pound was under speculative attack as foreign exchange market participants believed that the pound was over-valued against the Deutsche mark and other major currencies within the European Monetary System. After raising its key interest rate to 15% and spending as much as £27 billion in reserves to prop up the British pound in vain, the
UK government decided to exit the ERM on September 16, 1992 and allowed the pound to float. The pound quickly depreciated more than 10% against the Deutsche mark. Describe the advantages and disadvantages of the UK's entry into and exit from the ERM.

Reference no: EM13239119

Questions Cloud

Find the emf and r : A closed box has two metal terminals a and b. The inside of the box contains an unknown emf emf in series with a resistance R, Find the emf and R

Explain the reactions are spontaneous or nonspontaneous : Predict the sign of the entropy change for the following reactions and tell whether the reactions are spontaneous or nonspontaneous. a. C8H16 (g) + H2(g) ? C8H18 (g) b. C2H5OH (l) + 3O2(g)? 2CO2 (g) + 3H2O (g)

How many units would be produced domestically : Suppose that in the domestic market for computer chips the demand is Pd = 110 - Qd. The domestic supply is Ps = 10 + Qs. Foreign suppliers would be willing to supply any number of chips at a price of 30$.

Compute kc for the reaction : The concentration of N2O4 at equilibrium was 0.0750 M. Calculate Kc for the reaction, according to the above equation.

Describe the advantages and disadvantages of the uk erm : The UK entered the European Exchange Rate Mechanism (ERM) in October 1990 at 2.95 Deutsche mark per pound and agreed to keep the pound within a range of ±6% against other member currencies of the ERM.

Discuss the development of greek sculptural style : Discuss the development of Greek sculptural style from Archaic Period to Hellenistic Period using specific examples from each period. (5 examples total %u2013 Archaic period, Early Classical period, High Classical period, Late Classical period, and H..

Determine the magnitude of b : Vector a has a magnitude of 15 units and points die east. Vector b points due south. What is the magnitude of b if a-b has a magnitude of 25 units

Compute the mass of no2 in the final equilibrium mixture : Once the system has reached equilibrium, 5.00 g of NO2 is injected into the vessel, and the system is allowed to equilibrate once again. Calculate the mass of NO2 in the final equilibrium mixture.

Find the equilibrium price and quantity on the market : Consider a perfectly competitive market in which the market demand curveis Dd =10-Pd andsupplyisQs =2Ps. a) Find the equilibrium price and quantity on this market. b) Suppose the govt imposes the price ceiuling of 3$ per unit. How much is supplied

User Account

All Pages