definitions Exchange Rate Mechanism (ERM)

Exchange Rate Mechanism (ERM)

Arrangement at the heart of the European Monetary System which allows each member of the EMS to determine a mutually agreed-on central exchange rate for its currency; each rate is denominated in currency units per ECU. A system that was operated by some central banks within the European Union, which intervened in exchange markets to limit the fluctuations of their currencies relative to one another, while letting all of them collectively float.