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This was transmitted directly to the other countries whose currencies were pegged to the mark because their interest rates now rose in tandem with those in Germany. This is due to the Uncovered Interest Rate Parity Condition-if the interest rates were not the same in all ERM member countries then the countries with the higher interest rates would experience a boost in demand for their currency and the currency would appreciate...
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This is due to the Uncovered Interest Rate Parity Condition-if the interest rates were not the same in all ERM member countries then the countries with the higher interest rates would experience a boost in demand for their currency and the currency would appreciate. Whilst demand for the other countries would fall and their currencies would depreciate...
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