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Short-Term Capital Flows and Economic Crises$
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Stephany Griffith-Jones, Manuel F. Montes, and Anwar Nasution

Print publication date: 2001

Print ISBN-13: 9780198296867

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780198296867.001.0001

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Crises? What Crises? Escudo from ECU to EMU

Crises? What Crises? Escudo from ECU to EMU

(p.251) 11 Crises? What Crises? Escudo from ECU to EMU
Short-Term Capital Flows and Economic Crises

Jorge Braga De Macedo

Oxford University Press

The national economy of Portugal was exposed to financial and political crises that proved to be recurrent, and an inflationary environment when Portugal became a member of the European Community in 1985. When Cavaco Silva became prime minister, he was able to secure a huge part of parliament in the general elections that occurred in 1987 and 1991. A multi-annual fiscal adjustment strategy (MAFAS) was employed since his government implemented certain reforms. While this measure could be associated with the ECU, the financial and political stability brought on by such measures continued through the efforts of the socialist party which articulated a commitment towards the Economic and Monetary Union (EMU). The escudo exchange rates and interest rates reflected the sustained convergence that was expected through the 1992 Treaty on European Union. This chapter looks into how multilateral measures for surveillance imposed by the ‘code of conduct’ of the Exchange Rate Mechanism of the European Monetary System (ERM) improved national credibility.

Keywords:   national economy, financial and political crises, European Community, Exchange Rate Mechanism, Economic Monetary Union, ECU, exchange rates, interest rates

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