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Fiscal Policies and the Choice of Exchange Rate Regime

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  • de Kock, Gabriel
  • Grilli, Vittorio

Abstract

A common argument against either a monetary union or a regime or a fixed exchange rates is that they preclude flexible use of the inflation tax. The authors address this point of view by comparing three alternative exchange rate regimes: a pure float, an EMS-regime in which the exchange rate is fixed but can be realigned, and a monetary union. The authors model the three regimes as alternative commitments on future seigniorage policies. This approac h suggests that it is not possible to Pareto-rank the three regimes. O n the other hand, the authors provide intuitive conditions under which each of the systems is superior to the others. Copyright 1993 by Royal Economic Society.

Suggested Citation

  • 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.
  • Handle: RePEc:ecj:econjl:v:103:y:1993:i:417:p:347-58
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