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40 Years of Monetary Targets and Financial Crises in 20 OECD Countries

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  • Álvaro Almeida

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    (Faculdade de Economia da Universidade do Porto)

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    Abstract

    This paper examines differences in the stability of the foreign exchange, money, and stock markets, associated with the use of alternative monetary policy targets, based on data from a panel of 20 OECD countries, for the period 1961-2000. The main conclusion of the paper is that the choice of monetary policy target will significantly affect stability in financial markets. The use of inflation targets reduces the likelihood of crises in the foreign exchange and money markets (relative to any other monetary policy framework), suggesting that a central bank concerned with financial stability should adopt this framework. Results also suggest that exchange rate targeting frameworks tend to have higher likelihood of foreign exchange and money market crises, but multilateral exchange rate arrangements have lower likelihood of crises than unilateral pegs. The paper also includes a complete description of the monetary policy targets used in the countries analysed.

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    Bibliographic Info

    Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 128.

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    Length: 33 pages
    Date of creation: Apr 2003
    Date of revision:
    Handle: RePEc:por:fepwps:128

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    Related research

    Keywords: monetary policy; rules; financial crises.;

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    Cited by:
    1. Cristina Barbot, 2004. "Low cost carriers, secondary airports and State aid: an economic assessment of the Charleroi affair," FEP Working Papers 159, Universidade do Porto, Faculdade de Economia do Porto.
    2. Pedro Cosme Costa Vieira, 2005. "The importance in the papers' impact of the number of pages and of co-authors - an empirical estimation with data from top ranking economic journals," FEP Working Papers 169, Universidade do Porto, Faculdade de Economia do Porto.
    3. Mário Rui Silva & Hermano Rodrigues, 2005. "Public-Private Partnerships and the Promotion of Collective Entrepreneurship," FEP Working Papers 172, Universidade do Porto, Faculdade de Economia do Porto.
    4. Mário Rui Silva & Hermano Rodrigues, 2005. "Competitiveness and Public-Private Partnerships: Towards a More Decentralised Policy," FEP Working Papers 171, Universidade do Porto, Faculdade de Economia do Porto.
    5. Filipe J. Sousa & Luis M. de Castro, 2004. "The strategic relevance of business relationships: a preliminary assessment," FEP Working Papers 163, Universidade do Porto, Faculdade de Economia do Porto.
    6. Jorge M. S. Valente, 2004. "Local and global dominance conditions for the weighted earliness scheduling problem with no idle time," FEP Working Papers 156, Universidade do Porto, Faculdade de Economia do Porto.
    7. Rui Henrique Alves, 2004. "Europe: Looking for a New Model," FEP Working Papers 154, Universidade do Porto, Faculdade de Economia do Porto.
    8. Pedro Cosme Costa Vieira, 2005. "Multi Product Market Equilibrium with Sequential Search," FEP Working Papers 166, Universidade do Porto, Faculdade de Economia do Porto.
    9. Rosa Forte, 2004. "The relationship between foreign direct investment and international trade. Substitution or complementarity? A survey," FEP Working Papers 140, Universidade do Porto, Faculdade de Economia do Porto.

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