Importing Credibility Through Exchange Rate Pegging
Bibliographic Data
| ID | 9711331 |
|---|---|
| Authors | Berthold Herrendorf (0000-0002-7177-4156, University of Warwick, corresponding author) |
| Year | 1997 |
| Volume | 107 |
| Issue | 442 |
| Pages | 687-694 |
| Publication date | 1997-05-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.1111/j.1468-0297.1997.tb00034.x |
| OpenAlex | W2015085029 |
| Language | EN |
| Citations received | 2 |
| References cited | 4 |
This paper employs an optimal taxation framework in order to study the credibility of monetary policy-making in an open economy. Since inflation is, in part, uncontrollable due to stochastic disturbances, the authority's actions cannot be monitored perfectly when the exchange rate floats, thus implying that reputational forces may become ineffective. In contrast, pegging the nominal exchange rate to a low-inflation currency allows perfect monitoring, because the exchange rate is, in principle, controllable. For this reason, exchange rate pegging may import credibility and result in the best reputational equilibrium, even though the authority retains the discretion to devalue unexpectedly
Business · Credibility · Economics · Exchange rate · International economics · Monetary economics · Political science · Economic theories and models · Fiscal Policies and Political Economy · Law · Monetary Policy and Economic Impact
| Unique citing works | 2 |
|---|---|
| Citations per year | 0,07 |
| Citation span | 1997 - 2008 (12) |
| Citation velocity | historical |
| Highly cited | No |
| Citation types | Neutral: 2 |