The European Currency Unit — An Exercise in Successful Exchange Rate Management

Europe increasingly strengthens Us credentials as a stable currency zone and large trading block. The European Exchange Rates System forms an important building block of these developments. The European Currency Unit (ECU) constitutes the core of this system. This paper analyses the construction of the ECU and explains how compulsory and intra-marginal interventions as well as the convergence of national economic policies ensure the continued existence of a grid of fixed bilateral exchange rates amongst the member countries of the European Community, This system of exchange rate management appears to have substantially reduced intra-community exchange rate variability.