| In the 1990s, two events that took place in the arena of the international finance were exceptionally noticeable. One was the outbreak of financial crisis in Southeast Asia, compelling these countries to abandon fixed exchange rate system and turn to floating system; the other was the start-up of euro, enabling European Monetary Union (EMU) to practice irreversible fixed exchange rate system and single currency. Nowadays, although the flexible exchange rate system prevails in the world, EMU has achieved the unification of currency. The birth of euro is exerting great influence on the international finance and changing current patterns of international finance. Euro is supposed to become a international currency weighed against US dollar and an important reserve currency. Since 1994, China has been carrying out a single, managed floating system based on supply and demand in the market. However, in practice, it gradually became a fixed system pegging RMB to US dollar. The exchange rate arrangements in the course of European monetary integration, which was adjustable, pegged exchange rate within European Monetary System (EMS) since the Bretton Woods was collapsed, has accumulated rich experience and lessons and could give RMB exchange rate arrangements some helpful suggestions. In consideration of the status of euro and its reference for China's exchange rate arrangements, I found it necessary to study the arrangements of exchange rate in each stage of European integration. This paper consists of 5 chapters as follows. Chapter 1 introduces the historical background of European integration, which experienced a process from a low level to a high level and EMU is viewed as the highest goal of monetary integration. Three aspects were ascribed to the birth and development for European integration. First, European economic integration was the inner initiative; second, the break-up of international monetary regime was the outer pressure; third, it was concerned with the theory about monetary integration. There were three milestones during the process of integration. The first was the creation and failure of "Werner plan"; the second was the establishment of EMS; the third was the birth of the Treaty of Maastricht. Chapter 2 introduces the exchange rate arrangements for the first stage of European integration under Bretton Woods system, which, in general, provided the institutional framework for exchange rate stability. However, since the start of 1960s, the US dollar crisis frequently broke out and brought huge risks of exchange rate to European countries. Three steps were taken by EEC to maintain the exchange rate: first, the fluctuation band of exchange rate was reduced; second, "snake system" was set up; third, "united floating system" was founded. During this period of time, the achievements made by EEC contained the improvement in the degree of economic merge and the strengthening in the coordination in economic policies. The lack of independence of currencies was the main problem faced by EEC, which gradually get rid of this reliance with the collapse of Bretton Woods system. Chapter 3 is concerned with the arrangements of exchange rate for the second stage of European integration under EMS, under which the adjusted and pegged system was executed. Both inside and outside factors caused the establishment of EMS, which targeted to set up a stable currency area. EMS intended to have ECU play the role of central currency. However, as ECU was not genuine currency, the member countries turned to peg their money to D-mark. From 1979 till 1990, the exchange rate mechanism had 12 adjustments of exchange rate and an ever-increasing stable currency area was formed. The limitation of fluctuation of exchange rate greatly helped to adjust the policies in high-inflation countries to a more stable price goal, thereby laying the foundation for inflation convergence in low level and for highly stable exchange rate. EMS had two main problems: the parity grid required adjustments from time to t... |
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