The European Exchange Rate Mechanism (ERM) crisis of 1992 and the Pound Sterling Crisis

Seminar Paper , 2020 , 19 Pages , Grade: 1.7

Economics - Finance

This short seminar paper introduces the theory and fundamentals as well as the history and mechanisms which led to the creation of the European Monetary System (EMS) and later the European Economic and Monetary Union (EMU). It also follows the events culminating into the EMS’ crisis in 1992 and the permanent departure of the United Kingdom from this system. With the introduction of the EMU and the expansion of the European Union (EU) in the early years of the new millennium, the question arises of whether it is advisable for the newer members to become part of the European Exchange Rate mechanism-II (ERM-II) which leads to the introduction of the Euro in the future. The scope of this work only allows for a very pinpoint answer for this very complex topic but is a first step into more comprehensive and detailed literature.

II. Table of content

I. Abstract

II. Table of content

III. List of abbreviations

1. Introduction

2. Theories and fundamentals
2.1. Exchange rate theories / hypothesis
2.1.1. Purchasing power parity hypothesis
2.1.2. Interest rate parity theory
2.2. Optimal currency area theory
2.3. Formsofmonetaryintegration
2.4. The „impossible trinity“

3. European Monetary System
3.1. Historical development
3.2. The European Monetary Systems’ goals
3.3. Exchange Rate Mechanism

4. The “Black Wednesday” crisis of 1992
4.1. Timeline
4.2. The role of the German Bundesbank
4.3. Effects

5. ExchangeRateMechanism-II
5.1. Goals of the Exchange Rate Mechanism-II
5.2. The conception of the Exchange Rate Mechanism-II

6. Conclusion

7. References

• College: University of Hamburg (Fakultät für Wirtschafts- und Sozialwissenschaften)
• Course: Währungs- und Finanzkrisen
• Grade: 1.7
• Author: Andre Korbas (Author)
• Publication Year: 2020
• Pages: 19
• Catalog Number: V974476
• ISBN (eBook): 9783346322524
• ISBN (Book): 9783346322531
• Language: English
• Tags: European Exchange Rate Mechanism (ERM), Pound Sterling Crisis, EWG, Monetary Policy, Currency Snake, European Union, Pound Sterling, Economic Crisis, Pfundkrise