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Is Old Money Better than New? Duration and Monetary Regimes

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  • Mihov, Ilian
  • Rose, Andrew K

Abstract

We compare the duration and performance of different monetary regimes, especially the contrast between countries those that fix exchange rates and those that target inflation. Inflation targeting is a more durable policy; no country has yet been forced to abandon an inflation target, while many have abandoned fixed exchange rates. Indeed, even though inflation targeting began only in 1990, the duration of inflation targeting regimes is at least as long as, or longer than all alternative monetary regimes for comparable countries. Regime duration also matters in monetary policy; older regimes are typically more successful than younger ones in achieving low inflation.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6529.

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Date of creation: Oct 2007
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Handle: RePEc:cpr:ceprdp:6529

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Keywords: duration; exchange rate targeting; inflation performance; inflation targeting; monetary policy; monetary regimes; money;

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References

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  1. Laurence Ball & Niamh Sheridan, 2003. "Does Inflation Targeting Matter?," NBER Working Papers 9577, National Bureau of Economic Research, Inc.
  2. Marco Vega & Diego Winkelried, 2005. "Inflation Targeting and Inflation Behavior: A Successful Story?," Macroeconomics 0502026, EconWPA.
  3. Ashok Bhundia & Mark R. Stone, 2004. "A New Taxonomy of Monetary Regimes," IMF Working Papers 04/191, International Monetary Fund.
  4. Svensson, Lars E. O., 1998. "Inflation targeting as a monetary policy rule," CFS Working Paper Series 1998/16, Center for Financial Studies (CFS).
  5. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 97-116, Spring.
  6. Fatás, Antonio & Mihov, Ilian & Rose, Andrew K, 2004. "Quantitative Goals for Monetary Policy," CEPR Discussion Papers 4445, C.E.P.R. Discussion Papers.
  7. Frederic S. Mishkin & Klaus Schmidt-Hebbel, 2001. "One decade of inflation targeting in the world : What do we know and what do we need to know?," Working Papers Central Bank of Chile 101, Central Bank of Chile.
  8. Mishkin, F.S., 1998. "International Experiences with Different Monetary Policy Regimes," Papers 648, Stockholm - International Economic Studies.
  9. Rose, Andrew K., 2007. "A stable international monetary system emerges: Inflation targeting is Bretton Woods, reversed," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 663-681, September.
  10. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
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  12. Carlo Cottarelli & Curzio Giannini, 1997. "Credibility Without Rules," IMF Occasional Papers 154, International Monetary Fund.
  13. Frederic S. Mishkin, 2004. "Can Inflation Targeting Work in Emerging Market Countries?," NBER Working Papers 10646, National Bureau of Economic Research, Inc.
  14. Reinhart, Carmen & Rogoff, Kenneth, 2004. "The modern history of exchange rate arrangements: A reinterpretation," MPRA Paper 14070, University Library of Munich, Germany.
  15. Husain, Aasim M. & Mody, Ashoka & Rogoff, Kenneth S., 2005. "Exchange rate regime durability and performance in developing versus advanced economies," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 35-64, January.
  16. Michael W. Klein & Nancy P. Marion, 1994. "Explaining the Duration of Exchange-Rate Pegs," NBER Working Papers 4651, National Bureau of Economic Research, Inc.
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  18. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 7-46, 04.
  19. Scott Roger & Mark R. Stone, 2005. "On Target? the International Experience with Achieving Inflation Targets," IMF Working Papers 05/163, International Monetary Fund.
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Cited by:
  1. Creel, Jérôme & Hubert, Paul, 2012. "Constrained discretion in Sweden," Research in Economics, Elsevier, vol. 66(1), pages 33-44.
  2. Berganza, Juan Carlos & Broto, Carmen, 2012. "Flexible inflation targets, forex interventions and exchange rate volatility in emerging countries," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 428-444.
  3. William B.P. Robson, 2009. "To the Next Level: From Gold Standard to Inflation Targets - to Price Stability?," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 285, March.
  4. Jonung, Lars & Fregert, Klas, 2008. "Inflation Targeting Is a Success, So Far: 100 Years of Evidence from Swedish Wage Contracts," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(31), pages 1-25.

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