The European Monetary System has evolved since its conception into a system of fixed but adjustable rates to one of rigid fixed rates. The reason for this transformation is the Maastricht treaty and the objective of a European single currency. This article analyses the conditions under which fixed rates are viable. It shows that inflation rates as well as interest rates must be uniform in all participant countries. If, as is presently the case, a country like Germany receives specific shocks, monetary policies in the other countries of the system are necessarily non optimal.
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