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Examines the European Monetary System experience and whether it can be applied to the International Monetary System. Addresses the relationship between the ERM currencies and the US dollar. There have been suggestions for a 'common dollar policy'. However, advance agreement on a common policy is difficult to imagine, in view of the differing interests of individual ERM countries, as well as the United States. (Abstract amended)

The most striking feature of the Bremen proposals for a new European Monetary System (EMS) was the scepticism, and in many cases hostility, with which they were received by professional economists. The main positions on macro-economic questions—orthodox, monetarist and international monetarist—were all represented among the economists who submitted written evidence to the House of Commons Expenditure Committee, when it examined the EMS proposals last November. All doubted whether the proposals, so far as they were then known, could work, and some predicted an early breakdown. Some took the view that, even if the scheme could work, it would not be to Britain's advantage to join. Such convergence of opinion among professional economists, with monetarists and Keynesians appearing to be in the same camp, is sufficiently unusual to deserve notice. Nor is this just an example of the British giving voice to the prevalent anti-European feeling. German economists, represented for example by the five Institutes, have been similarly sceptical.

ABSTRACTThe article examines first the European Monetary System (EMS) experience and whether it can be applied to the International Monetary System (IMS). The EMS has particular features: it is not simply a regional Bretton Woods, and it also has a dimension going beyond the monetary field.Countries participating in the EMS exchange rate mechanism (ERM) have achieved a substantial reduction in exchange rate variability and a high degree of convergence toward cost and price stability. On a worldwide scale, things would be different: general political events have great influence on exchange rates, and large capital shifts are more likely. Whether the same degree of convergence of monetary policies can be achieved worldwide is doubtful. In the absence of a common political interest in integration, short‐term and domestic policy considerations will probably dominate policy decisions.In the second section the article addresses the relationship between the ERM currencies and the US dollar. There have been suggestions for a 'common dollar policy'. However, advance agreement on a common policy is difficult to imagine, in view of the differing interests of individual ERM countries, as well as the United States. The main problem for the relationship between ERM currencies, the dollar, the yen, and pound sterling lies in the need for more convergence of developments and compatibility of policies.The achievements of the EMS do not lead to the conclusion that a system of stabilized exchange rates would work satisfactorily on a worldwide scale. A high degree of policy co‐ordination, not only of monetary policy, but also of other economic policies, would be needed.