Identifying Austria's implicit monetary target: an alternative test of the "hard currency" policy
AbstractOne simple test of the long-run viability of an exchange-rate peg, which complements tests based on market expectations, is to ask whether the implicit inflation target ofthe pegging country is the same as that of the anchor country. If the implicit inflation targets of the two countries are different, the peg's long-run credibility can be rejected. The implicit inflation target is defined as the policy-implied, trend rate of inflation. The proposed test is applied to the Austrian experience with a 'hard currency' policy aimed at targeting its exchange rate with the Deutsche mark.
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Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 1995-005.
Date of creation: 1995
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