EMS, it is not a participant in the major function of the system, which is exchange rate management, which involve operation of the exchange rate mechanism (ERM) (Scott, 1986, p. 187).
The ERM of the EMS may be described as a fixed, but adjustable, exchange rate system. It is fixed, in that the bilateral rates between each of the currencies within the system is established by the EMS (Scott, 1986, p. 188). With the exception of the Italian lira, the currency exchange rates are permitted to fluxuate with a range of + 2.5 percent; the lira is permitted to fluxuate within a range of + 6.0 percent (p. 188). The countries participating in the ERM are obligated to act to preclude the movement of rates outside of the prescribed ranges.
The rates are adjustable, in that the fixed bilateral rates may be changed, when economic conditions warrant such changes (David, 1985, p. 18). Adjustment of the rates, even if only between two of the participating countries, however, requires the unanimous consent of all of the countries participating in the
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