Price and Monetary Dynamics Under Alternative Exchange Rate Regimes

Author/Editor:

M. F. Bleaney

Publication Date:

May 1, 1999

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

According to theory, inflation persistence should have less variance across countries under pegged than floating exchange rates, but not necessarily a lower mean. The paper tests this prediction on postwar data for OECD countries. After allowing for the upward bias to persistence estimates created by shifts in mean inflation, the paper finds persistence has a greater spread (but not a higher mean) in the floating-rate period, as predicted by theory. Monetary growth has been much less accommodative of inflation under floating rates, most probably because of the shifts in monetary policy rather than those in exchange rate regime.

Series:

Working Paper No. 1999/067

Subject:

Consumer prices Exchange rate arrangements Floating exchange rates Foreign exchange Inflation Inflation persistence Prices

English

Publication Date:

May 1, 1999

ISBN/ISSN:

9781451848885/1018-5941

Stock No:

WPIEA0671999

Pages:

19

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