Monetary accommodation, exchange rate regimes and inflation persistence by George S. Alogoskoufis

Cover of: Monetary accommodation, exchange rate regimes and inflation persistence | George S. Alogoskoufis

Published by Centre for Economic Policy Research in London .

Written in English

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Subjects:

  • Foreign exchange.,
  • Inflation (Finance)

Edition Notes

Book details

StatementGeorge S. Alogoskoufis.
SeriesDiscussion paper series / Centre for Economic Policy Research -- no.503
The Physical Object
Pagination35p. ;
Number of Pages35
ID Numbers
Open LibraryOL18961138M

Download Monetary accommodation, exchange rate regimes and inflation persistence

The author presents evidence that fixed-exchange-rate regimes like the classical gold standard and Bretton Woods were associated with negligible accommodation and inflation persistence in contrast. The paper uses an overlapping contracts model to propose that the higher persistence of inflation is the result of a higher monetary and exchange rate accommodation of price changes in flexible exchange rate regimes.

The evidence does not seem to contradict this hypothesis. Monetary Accommodation, Exchange Rate Regimes and Inflation Persistence Article (PDF Available) January with 29 Reads How we measure 'reads'Author: George Alogoskoufis.

The author presents evidence that fixed-exchange-rate regimes like the classical gold standard and Bretton Woods were associated with negligible accommodation and inflation persistence in contrast to managed-exchange-rate regimes. These results highlight the importance of monetary regimes for expectations and the behavior of wage and price setters.

Exchange Rate Regimes and Inflation Persistence MICHAEL BLEANEY* Some empirical research has suggested that inflation is more persistent under floating exchange rates. Theoretically, we should expect a higher variance of inflation persistence across countries under floating rates, but not necessarily a higher mean.

problems. Inflation persistence is similar under floating and soft pegs. The finding of low inflation persistence in hard pegs is a new result. Citation: Bleaney, Michael and Manuela Francisco, () "Inflation persistence and exchange rate regimes: evidence from developing countries." Economics Bulletin, Vol.

6, No. 2 pp. 1− exchange rate regimes appear to be associated with negligible persistence of inflation, while regimes of managed exchange rates are associated with very high inflation persistence. They propose that the higher inflation persistence is the result of the higher monetary and exchange rate accommodation of price changes in exchange rate regimes.

This paper investigates the relation between the dynamics of inflation and exchange-rate regimes. It demonstrates that fixed exchange-rate regimes such as the international gold standard and the Bretton Woods gold-dollar standard appear to be associated with negligible persistence of inflation in the industrial economies, while regimes of managed exchange rates are associated with very high.

Chapter II of the Annual Economic Report After high inflation and crises in the s, many emerging market economies (EMEs) adopted inflation targeting as their monetary policy framework, catching up with the trend set by advanced economies.

The transition has been supported by policies to strengthen economic fundamentals, notably reforms to overcome fiscal dominance, to.

This suggests that if monetary and exchange rate policy accommodates price shocks to maintain the level of real aggregate demand and the level of international competitiveness, then it will affect the expectations of wage and price setters, and will result in a higher persistence of inflation.

Alogoskoufis, G. () ‘Monetary Accommodation, Exchange Rate Regimes and Inflation Persistence’, Economic Journal, 2 May, pp. – Google ScholarCited by: 9.

Monetary accommodation, exchange rate regimes and inflation persistence, (). Monetary policy rules in practice: some international evidence,Author: Manuela Francisco and Michael Bleaney.

MONETARY ACCOMMODATION, EXCHANGE RATE REGIMES AND INFLATION PERSISTENCE* George S. Alogoskoufis Price stability has almost always featured as one of the Monetary accommodation objectives of macroeconomic policy in the industrialised countries.

Yet, not unlike other objectives, there have been many periods when actual performance has been. Inflation persistence and exchange rate regimes: Evidence from developing countries scope for monetary accommodation of inflation shocks is much reduced.

to. "Exchange Rate Regimes and Persistence of Inflation in Thailand," MPRA PaperUniversity Library of Munich, Germany. Evžen Exchange rate regimes and inflation persistence book & Balázs Varga, " The Impact of Monetary Strategies on Inflation Persistence," International Journal of Central Banking, International Journal of Central Banking, vol.

14(4), pagesSeptember. based inflation persistence. Constraining Exchange Rate Arrangement A constraining exchange rate regime linked to a reference currency is primarily used to stabilize a domestic currency, but a secondary role might be to control inflation.

This is because domestic inflation is to a large extent determined by the inflation in the country. In Fig.

1, we analyze the two managed exchange rate regimes in which there is no weight on output the first graph, we set φ= and no autocorrelation in monetary the second graph, we set φ= but we assume autocorrelation in the monetary shocks (ρ R =). We let ϑ and μ varying between 0 and In both cases the degree of nominal price stickiness, α, is set Cited by: Downloadable.

We analyze the impact of price stability-oriented monetary strategies (inflation targeting - IT - and constraining exchange rate arrangements) on inflation persistence using a timevarying coefficients framework in a panel of 68 countries ().

We show that explicit IT has a stronger effect on taming inflation persistence than implicit IT and is effective even during and. 3 Inflation under metallic monetary regimes 21 Inflation caused by an additional supply ofthe monetary metal 21 The debasement ofmetal standards by rulers 24 Reasons for the introduction and maintenance ofstable metallic monetary regimes 30 Price and exchange controls 32 Consequences ofinflation for the real economy The member countries of the International Monetary Fund collaborate to try to assure orderly exchange arrangements and promote a stable system of exchange rates, recognizing that the essential purpose of the international monetary system is to facilitate the exchange of goods, services, and capital, and to sustain sound economic growth.

The paper reviews the stability of the overall system of. context of changes in monetary/exchange rate regimes. Importantly, there is an ongoing debate on how changes in exchange rate regimes affect inflation persistence.

Section I presents a model of the inflationary process based on staggered contracts. This suggests that if monetary and exchange rate policy accommodates price shocks to maintain the level of real aggregate demand and the level of international competitiveness, then it will affect the expectations of wage and price setters, and will result in a higher persistence of inflation.

monetary regime or a low-volatility regime shuffles the weight from the more-persistent to the less-persistent shocks, resulting in a decline in inflation persistence.

The timing of regimes from the estimated MSNK model generates a statistically significant 'low-high-low' pattern of inflation persistence that is consistent with. After correction for mean shifts, there is evidence of greater inflation persistence in the post-Bretton Woods period, but no evidence of variation across exchange rate regimes.

Monetary growth has been much less accommodative of inflation sincewith Author: Michael Bleaney. Research highlights Exchange rate targeting regime generates oscillations and slow convergence to equilibrium in response to shocks due to the ‘Walters critique’ effect when inflation is highly persistent.

The Walters effect happens when an inflationary economy entering a fixed exchange rate regime is forced to reduce nominal exchange rate, which in turn will reduce real interest rate Cited by: 9. The Phillips Curve, The Persistence of Inflation, and the Lucas Critique: Evidence from Exchange-Rate Regimes We present evidence from the United States and the United Kingdom that the.

Exchange rate regimes and inflation persistence, IMF Staff Pap pp. Bleaney, M.F., and M. Francisco, Exchange rate regimes and inflation: only hard pegs make a difference, Discussion Paper no. 03/15, University of Nottingham School of Economics.

Burdekin, R.C. and Siklos, P., Exchange rate regimes and shifts in. Outside fixed exchange rate regimes, persistently high inflation can be attributed to the failure of political parties to pre-commit to price stability.

The higher aversion of ‘socialists’ to unemployment results in an inflation rate which is higher by 8 percentage points. Abstract. This paper investigates the relation between the dynamics of inflation and exchange-rate regimes.

It demonstrates that fixed exchange-rate regimes such as the international gold standard and the Bretton Woods gold-dollar standard appear to be associated with negligible persistence of inflation in the industrial economies, while regimes of managed exchange rates are associated with Author: George Alogoskoufis.

Alogoskoufis, George S. () “Monetary Accommodation, Exchange Rate Regimes and Inflation Persistence.” The Economic Journal – Google ScholarCited by: 7. Pre-war inflation persistence under the gold standard. To write a satisfactory history of the monetary policy of even one of the major countries would require a full book.

To do so for the whole world within the compass of a single chapter is impossible. In an economy that adopts a fixed exchange rate regime, a currency crisis can. persistence and two types of the monetary strategy: constrained exchange arrangement and inflation targeting. We show contributing effect of inflation targeting with respect to inflation persistence: effect of explicit IT is stronger than that of the implicit IT.

The effect of the exchange arrangement on inflation persistence is reserve. 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 Cited by: 1. In contrast, if there is no clear association between shifts in the exchange rate regime and inflation persistence, arguments underlying official resistance to calls for greater exchange rate flexibility would appear very weak (see, for example, IMFp.

14; IMFp. Introduction. In recent years, median inflation rates in LDCs have been substantially higher than in industrial countries.

Even excluding cases of hyperinflation, poverty seems to be associated with more rapid price growth. 1 However, an LDC that can credibly commit itself to an exchange rate pegged against an industrial currency might be able to do better than the LDC average, and enjoy Cited by: monetary accommodation the use of MONETARY POLICY to ‘accommodate’ sudden supply-side changes in the economy, for example, an increase in nominal money supply to offset the deflationary impact of an oil price or other major cost increase.

In the absence of monetary accommodation, the COST-PUSH INFLATION associated with an increase in oil prices would act to reduce the real. The member countries of the International Monetary Fund collaborate to try to assure orderly exchange arrangements and promote a stable system of exchange rates, recognizing that the essential purpose of the international monetary system is to facilitate the exchange of goods, services, and capital, and to sustain sound economic growth.

The paper reviews the stability of the overall. Reserve Country Monetary Policy under Fixed Exchange Rates Learning Objectives Learn how monetary policy in the foreign reserve country affects domestic GNP, the value of the exchange rate, and the current account balance in a fixed exchange rate system in the context of the AA-DD model.

Investigating Inflation Persistence Across Monetary Regimes I: Empirical Evidence Luca Benati* although some remnants of the gold standard and fixed exchange rates [ ] arrangements were in operation as recently as vidence of persistence in the inflation rate suggests that market agents expect that monetary.

Grauwe () gives their views on the relationship between inflation and exchange rate that exchange rate regime and inflation is that pegged exchange rate contribute to lower and more stable inflation.

The exchange rate fixity does not reduce economic growth in the South Eastern and Central European countries. Monetary policy is the policy adopted by the monetary authority of a country that controls either the interest rate payable on very short-term borrowing or the money supply, often targeting inflation or the interest rate to ensure price stability and general trust in the currency.

Unlike fiscal policy, which relies on taxation, government spending, and government borrowing, as tools for a.After correction for mean shifts, there is evidence of greater inflation persistence in the post--Bretton Woods period, but no evidence of variation across exchange rate regimes.

Monetary growth has been much less accommodative of inflation sincewith Cited by: Georgios Alogoskoufis (Greek: Γιώργος Αλογοσκούφης) (born 17 October ) is a professor of economics at the Athens University of Economics and Business since He was a member of the Hellenic Parliament from September till October and served as Greece's Minister of Economy and Finance from March till January Alma mater: University of Athens, London School .

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