What is EXCHANGE RATE MECHANISM (ERM)?

Method of maintaining equilibrium in an exchange rate. Member countries of an economic community maintain exchange rate parity among their competing currencies. Fluctuation up to some agreed-to limit is allowed between specific currencies. Over the limit triggers mutual financial banking involvement to restore some parity.

More On This Topic



Link to This Definition
Did you find this definition of EXCHANGE RATE MECHANISM (ERM) helpful? You can share it by copying the code below and adding it to your blog or web page.
Written and fact checked by The Law Dictionary