ABSTRACT When the European Monetary System was negotiated in 1978, governments in France, Britain, and Italy took very different approaches to this new international institution for coordinating exchange rate policies. The French government actively supported the creation of the European Monetary System, the Italian government entered the system but on weaker terms than the French, and the British government refused to enter the system, preferring to allow the pound to float. To explain these different policy choices, I analyze the impact of domestic politics and institutions on exchange rate policy, paying particular attention to how the organization of bank-industry relations and government instability shape policymakers' policy preferences and their abilities to implement these preferences. There are many approaches for explaining international economic policy coordination. One characteristic most approaches have in common is their focus on inter-state phenomena, such as the distribution of power
