This study reviews developments in the European Monetary System from the beginning of 1983 to August 1986; it updates and complements an earlier study prepared by staff members of the International Monetary Fund and published as Occasional Paper No. 19, which covered the time period from the inception of the European Monetary System to the end of 1982.Like the earlier study, the present study limits itself to a discussion of the evolution of the system and of exchange rate developments and to an analysis of exchange rate variability and economic convergence.The authors are aware that there are other important issues that remain for future work.These include the role of exchange rate policy in fostering domestic economic adjustment, a more detailed analysis of the international competitiveness of EMS countries, and the evolution of the private ECU and its implications for the functioning and further development of the EMS.Like Occasional Paper No. 19, this paper was prepared in the European Department.The authors benefited from a great number of helpful comments and suggestions made by colleagues in their own and other departments of the International Monetary Fund.
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