Britain entry in exchange rate mechanism of ems

Reference no: EM1345865

When Britain announced its entry in the exchange rate mechanism of EMS on October 5, 1990, the price of British gilts (long term government bonds) soared and sterling rose in value.

a. What may account for these price jumps?

b. Sterling entered the ERM at a central rate against the DM of DM 2.95, and it is allowed to move within a band of plus and minus 6% of this rate. What are sterling's upper and lower rates against the DM?

Reference no: EM1345865

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