The Exchange Rate Mechanism (ERM) is a system designed to manage the value of a country's currency in relation to others. It aims to stabilize exchange rates and reduce volatility, allowing for smoother international trade and investment. By maintaining a fixed or semi-fixed exchange rate, countries can promote economic stability and predictability. The original ERM was part of the European Monetary System and helped prepare countries for the introduction of the Euro. It allowed currencies to fluctuate within a set range, ensuring that no currency strayed too far from its target value, thus fostering economic cooperation among member states.