Abstract
Contrary to the original intentions of its founders, the European Monetary System (EMS) has developed into an asymmetric system with Germany as the dominant country. Consequently, not only the effects of monetary policy, but also the effects of a real shock differ subject to where it occurs. This is due to the responses of the money supplies induced by real shocks. In this paper the relevance of this asymmetry for the effects of a fiscal policy conducted in the countries of the EMS is analysed. In addition, a change of the world interest rate is considered. The model of the exchange rate union includes the links to the rest of the world, i.e. the interaction between the pegged exchange rate and the flexible dollar exchange rate is taken into account.
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