Capital controls, the EMS and EMU

Article Abstract:

The collapse of the European Monetary System in the early 1990s has led to doubts that capital controls can minimize speculative attacks against member currencies. Capital controls exercised in previous occasions accomplished this task, but only due to special circumstances. The imposition of a transaction tax or bank deposit requirements as alternatives may also fail to stabilize currencies because these rules may be evaded and may have adverse effects on the globalization of financial markets. Nevertheless, monetary union is still possible given a wide band of fluctuation among European currencies.

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Sand in the wheels of foreign exchange markets: a sceptical note

Article Abstract:

The near-collapse of the European Monetary System in the early 1990s points to the vulnerability of national currencies to speculative attacks. To maintain monetary stability, economists have proposed several policies: zero-interest margin deposits, additional bank capital requirements and a global transactions tax. However, the effectiveness of these recommendations depends on their applicability across markets, products and institutions. Implementation of the transactions tax, in particular, may suffer from offshore movements of bank deposit transfers.

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Two cases for sand in the wheels of international finance

Article Abstract:

Monetary stability in the form of pegged exchange rates has been attempted many times in economic history. In the 1990s, the collapse of the European Monetary System and its members' attempts to achieve monetary union has shown this to be a difficult task in the face of national monetary autonomy and international capital mobility. Nevertheless, monetary policies may be imposed that will allow exchange rate fluctuations to co-exist with national autonomy and international markets. One such policy is a tax levied on all international transactions.

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