IDEAS home Printed from https://ideas.repec.org/a/psl/bnlqrr/199534.html
   My bibliography  Save this article

Domestic pressures and the exchange rate regime: why economically bad decisions are politically popular?

Author

Listed:
  • H.P. GRÃœNER

    (University of Konstanz)

  • C. HEFEKER

    (University of Konstanz)

Abstract

Every currency crisis brings with it a discussion on the optimal choice of the exchange rate regime. This literature is characterised by an exclusive focus on this single policy issue whilst taking other institutional choices as given. The authors attempt to develop an approach which incorporates a simultaneous choice of three major institutional elements that are germane to this issue and which affect social welfare.

Suggested Citation

  • H.P. Grãœner & C. Hefeker, 1995. "Domestic pressures and the exchange rate regime: why economically bad decisions are politically popular?," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 48(194), pages 331-350.
  • Handle: RePEc:psl:bnlqrr:1995:34
    as

    Download full text from publisher

    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/10496/10383
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1169-1189.
    2. Saint-Paul, Gilles, 1995. "Some political aspects of unemployment," European Economic Review, Elsevier, vol. 39(3-4), pages 575-582, April.
    3. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-286, March.
    4. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
    5. Francesco Giavazzi & Marco Pagano, 1991. "The Advantage of Tying One's Hands: EMS Discipline and Central Bank Credibility," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 303-330, National Bureau of Economic Research, Inc.
    6. Gilles Saint-Paul, 1994. "Do Labor Market Rigidities Fulfill Distributive Objectives?: Searching for the Virtues of the European Model," IMF Staff Papers, Palgrave Macmillan, vol. 41(4), pages 624-642, December.
    7. Hans Grüner & Carsten Hefeker, 1996. "Bank cooperation and banking policy in a monetary union: A political-economy perspective on EMU," Open Economies Review, Springer, vol. 7(3), pages 183-198, July.
    8. Wyplosz, Charles, 1989. "Asymmetry in the EMS: Intentional or systemic?," European Economic Review, Elsevier, vol. 33(2-3), pages 310-320, March.
    9. Barry Eichengreen & Jeffry Frieden, 1993. "The Political Economy Of European Monetary Unification: An Analytical Introduction," Economics and Politics, Wiley Blackwell, vol. 5(2), pages 85-104, July.
    10. Michael D. Bordo & Finn E. Kydland, 1990. "The Gold Standard as a Rule," NBER Working Papers 3367, National Bureau of Economic Research, Inc.
    11. Richard Baldwin & Paul Krugman, 1989. "Persistent Trade Effects of Large Exchange Rate Shocks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(4), pages 635-654.
    12. Hefeker, Carsten, 1995. "The political choice and collapse of fixed exchange rates," Discussion Papers, Series II 277, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    13. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90, National Bureau of Economic Research, Inc.
    14. Paul De Grauwe, 1993. "The Political Economy of Monetary Union in Europe," The World Economy, Wiley Blackwell, vol. 16(6), pages 653-661, November.
    15. Bofinger, Peter, 1994. "Is Europe an Optimum Currency Area?," CEPR Discussion Papers 915, C.E.P.R. Discussion Papers.
    16. Grilli, Vittorio, 1989. "Exchange rates and seigniorage," European Economic Review, Elsevier, vol. 33(2-3), pages 580-587, March.
    17. Salvatore,Dominick (ed.), 1993. "Protectionism and World Welfare," Cambridge Books, Cambridge University Press, number 9780521414555.
    18. Gottfries, Nils & Horn, Henrik, 1987. "Wage Formation and the Persistence of Unemployment," Economic Journal, Royal Economic Society, vol. 97(388), pages 877-884, December.
    19. Alberto Giovannini, 1993. "Bretton Woods and Its Precursors: Rules versus Discretion in the History of International Monetary Regimes," NBER Chapters, in: A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, pages 109-154, National Bureau of Economic Research, Inc.
    20. Peree, Eric & Steinherr, Alfred, 1989. "Exchange rate uncertainty and foreign trade," European Economic Review, Elsevier, vol. 33(6), pages 1241-1264, July.
    21. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-1357, September.
    22. Backus, David & Driffill, John, 1985. "Inflation and Reputation," American Economic Review, American Economic Association, vol. 75(3), pages 530-538, June.
    23. Melitz, Jacques, 1987. "Monetary Discipline, Germany, and the European Monetary System," CEPR Discussion Papers 178, C.E.P.R. Discussion Papers.
    24. Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Hysteresis in unemployment," European Economic Review, Elsevier, vol. 31(1-2), pages 288-295.
    25. de Kock, Gabriel & Grilli, Vittorio, 1993. "Fiscal Policies and the Choice of Exchange Rate Regime," Economic Journal, Royal Economic Society, vol. 103(417), pages 347-358, March.
    26. Avinash Dixit, 1989. "Hysteresis, Import Penetration, and Exchange Rate Pass-Through," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 205-228.
    27. Mr. Michael Mussa & Mr. Robert P Flood, 1994. "Issues Concerning Nominal Anchors for Monetary Policy," IMF Working Papers 1994/061, International Monetary Fund.
    28. Salvatore,Dominick (ed.), 1993. "Protectionism and World Welfare," Cambridge Books, Cambridge University Press, number 9780521424899.
    29. Eichengreen, B., 1992. "Should the Maastricht Treaty be Saved?," Princeton Studies in International Economics 74, International Economics Section, Departement of Economics Princeton University,.
    30. Cohen, Daniel & Wyplosz, Charles, 1989. "The European Monetary Union: An Agnostic Evaluation," CEPR Discussion Papers 306, C.E.P.R. Discussion Papers.
    31. Casella, Alessandra, 1992. "On Markets and Clubs: Economic and Political Integration of Regions with Unequal Productivity," American Economic Review, American Economic Association, vol. 82(2), pages 115-121, May.
    32. George Tavlas, 1994. "The theory of monetary integration," Open Economies Review, Springer, vol. 5(2), pages 211-230, March.
    33. Vickers, John, 1986. "Signalling in a Model of Monetary Policy with Incomplete Information," Oxford Economic Papers, Oxford University Press, vol. 38(3), pages 443-455, November.
    34. Vaubel, Roland, 1990. "Currency Competition and European Monetary Integration," Economic Journal, Royal Economic Society, vol. 100(402), pages 936-946, September.
    35. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    36. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-167, March.
    37. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bernd Hayo & Carsten Hefeker, 2001. "Do We Really Need Central Bank Independence? A Critical Re- examination," Macroeconomics 0103006, University Library of Munich, Germany.
    2. Hayo, Bernd & Hefeker, Carsten, 2002. "Reconsidering central bank independence," European Journal of Political Economy, Elsevier, vol. 18(4), pages 653-674, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hefeker, Carsten, 1995. "The political choice and collapse of fixed exchange rates," Discussion Papers, Series II 277, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    2. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482, Elsevier.
    3. Richard Mash, 2000. "The Time Inconsistency of Monetary Policy with Inflation Persistence," Economics Series Working Papers 15, University of Oxford, Department of Economics.
    4. Mihov, Ilian & Sibert, Anne, 2006. "Credibility and Flexibility with Independent Monetary Policy Committees," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(1), pages 23-46, February.
    5. Sibert, Anne & Mihov, Ilian, 2002. "Credibility and Flexibility with Monetary Policy Committees," CEPR Discussion Papers 3278, C.E.P.R. Discussion Papers.
    6. Barry Eichengreen., 1993. "International Monetary Arrangements for the 21st Century," Center for International and Development Economics Research (CIDER) Working Papers C93-021, University of California at Berkeley.
    7. Gruner, Hans Peter, 1997. "A Comparison of Three Institutions for Monetary Policy When Central Bankers Have Private Objectives," Public Choice, Springer, vol. 92(1-2), pages 127-143, July.
    8. Roisland, Oistein, 2001. "Institutional Arrangements for Monetary Policy When Output Is Persistent," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(4), pages 994-1014, November.
    9. George Alogoskoufis, 2018. "The Clash of Central Bankers with Labour Market Insiders, and the Persistence of Inflation and Unemployment," Economica, London School of Economics and Political Science, vol. 85(337), pages 152-176, January.
    10. Huiping Yuan & Stephen M. Miller & Langnan Chen, 2011. "The Optimality And Controllability Of Monetary Policy Through Delegation With Consistent Targets," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(1), pages 82-106, February.
    11. Obstfeld, Maurice, 1997. "Destabilizing effects of exchange-rate escape clauses," Journal of International Economics, Elsevier, vol. 43(1-2), pages 61-77, August.
    12. Masciandaro, Donato, 2022. "Independence, conservatism, and beyond: Monetary policy, central bank governance and central banker preferences (1981–2021)," Journal of International Money and Finance, Elsevier, vol. 122(C).
    13. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    14. Sorge, Marco M., 2013. "Robust delegation with uncertain monetary policy preferences," Economic Modelling, Elsevier, vol. 30(C), pages 73-78.
    15. Francesco Salsano, 2022. "Monetary policy when the objectives of central bankers are imperfectly observable," Scottish Journal of Political Economy, Scottish Economic Society, vol. 69(4), pages 396-415, September.
    16. Thierry Warin, 2006. "A Note on Post-Modern Monetary Policy," Middlebury College Working Paper Series 0617, Middlebury College, Department of Economics.
    17. Beetsma, Roel M W J & Jensen, Henrik, 1998. "Inflation Targets and Contracts with Uncertain Central Banker Preferences," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 384-403, August.
    18. Stanley Fischer, 1995. "Modern Approaches to Central Banking," NBER Working Papers 5064, National Bureau of Economic Research, Inc.
    19. Huiping Yuan & Stephen M. Miller, 2006. "The Making of Optimal and Consistent Policy: An Implementation Theory Framework for Monetary Policy," Working papers 2006-06, University of Connecticut, Department of Economics, revised Jan 2009.
    20. Alex Cukierman & Stefan Gerlach, 2003. "The inflation bias revisited: theory and some international evidence," Manchester School, University of Manchester, vol. 71(5), pages 541-565, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:psl:bnlqrr:1995:34. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Carlo D'Ippoliti (email available below). General contact details of provider: http://www.economiacivile.it .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.