European Monetary System (EMS)

Search Dictionary

Definition of 'European Monetary System (EMS)'

The European Monetary System (EMS) was a system of fixed exchange rates among the currencies of the European Community (EC) member states. It was established in 1979 and was in operation until 1999, when it was replaced by the euro.

The EMS was created in response to the instability of the Bretton Woods system of fixed exchange rates, which had collapsed in 1971. The EMS was designed to provide greater stability for the EC's economies and to facilitate trade between member states.

The EMS operated on a system of fixed but adjustable exchange rates. The central exchange rate between the ECU (European Currency Unit) and each EC member state's currency was set by the European Monetary Cooperation Fund (EMCF). Member states were required to maintain their exchange rates within a narrow band of 2.25% above or below the central rate.

The EMS was successful in providing greater stability for the EC's economies and in facilitating trade between member states. However, it came under increasing pressure in the early 1990s, as a result of the reunification of Germany and the introduction of the euro. The EMS was finally abandoned in 1999, when the euro was introduced.

The EMS was a significant step in the development of the European Union. It helped to create a more stable and integrated European economy, and it paved the way for the introduction of the euro.

Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 150 bonus reputation points for each definition that is accepted.

Is this definition wrong? Let us know by posting to the forum and we will correct it.