Price and Monetary Dynamics Under Alternative Exchange Rate Regimes

19 Pages Posted: 13 Feb 2006

See all articles by Michael Bleaney

Michael Bleaney

University of Nottingham - School of Economics

Date Written: May 1999

Abstract

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.

Keywords: Price, exchange rates, money, inflation

JEL Classification: E31, E50, F31, F41

Suggested Citation

Bleaney, Michael, Price and Monetary Dynamics Under Alternative Exchange Rate Regimes (May 1999). IMF Working Paper No. 99/67, Available at SSRN: https://ssrn.com/abstract=880594

Michael Bleaney (Contact Author)

University of Nottingham - School of Economics ( email )

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