This paper analyzes the stabilizing properties of alternative monetary policy regimes. In practice there is a choice between two broad types of monetary policy regimes: a fixed exchange rate regime or a floating exchange rate regime. In this paper I compare exchange rate targeting with different floating exchange rate regimes: strict price level targeting, flexible price level targeting and output gap targeting. The paper also evaluates the actual choice of monetary policy regime for seven countries with a pure floating exchange rate regime. In most cases the actual regime can be described as flexible price level targeting. The results suggest that flexible and strict price level targeting gives lower real and nominal variability than both exchange rate targeting and output gap targeting.
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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number
2002:14.
Length: 38 pages Date of creation: 18 Aug 2002 Date of revision: Handle: RePEc:hhs:uunewp:2002_014
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Find related papers by JEL classification: E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy F31 - International Economics - - International Finance - - - Foreign Exchange F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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