Editing Euro (section)

===Flexible exchange rates===

The ECB targets [[interest rate]]s rather than [[exchange rate]]s and in general, does not intervene on the foreign exchange rate markets. This is because of the implications of the [[Mundell–Fleming model]], which implies a central bank cannot (without [[capital control]]s) maintain interest rate and exchange rate targets simultaneously, because increasing the [[money supply]] results in a [[Currency appreciation and depreciation|depreciation]] of the currency. In the years following the [[Single European Act]], the EU has liberalised its capital markets and, as the ECB has [[inflation targeting]] as its [[monetary policy]], the exchange-rate regime of the euro is [[floating exchange rate|floating]].