IDEAS home Printed from https://ideas.repec.org/a/eee/eecrev/v38y1994i3-4p447-468.html
   My bibliography  Save this article

Fixed exchange rates as a means to price stability: What have we learned?

Author

Listed:
  • Svensson, Lars E. O.

Abstract

The paper discusses what we have learned from last year's currency crises in ERM and the Nordic countries about fixed exchange rates as a means to achieve price stability. After discussing the explanations for the crises, the paper concludes that fixed exchange rates are not a shortcut to price stability. Monetary stability and credibility have to be built at home and cannot easily be imported from abroad. Fixed exchange rates are more fragile and difficult to maintain than previously thought. They may even be in conflict with price stability, by inducing a procyclical destabilizing monetary policy, and by inducing an inflation bias. Building monetary credibility is even more important with flexible exchange rates.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Svensson, Lars E. O., 1994. "Fixed exchange rates as a means to price stability: What have we learned?," European Economic Review, Elsevier, vol. 38(3-4), pages 447-468, April.
    • Handle: RePEc:eee:eecrev:v:38:y:1994:i:3-4:p:447-468
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/0014-2921(94)90084-1
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Obstfeld, Maurice, 1986. "Rational and Self-fulfilling Balance-of-Payments Crises," American Economic Review, American Economic Association, vol. 76(1), pages 72-81, March.
    2. Robert P. Flood & Peter M. Garber, 1987. "Gold Monetization and Gold Discipline," Palgrave Macmillan Books, in: Robert Z. Aliber (ed.), The Reconstruction of International Monetary Arrangements, chapter 10, pages 183-211, Palgrave Macmillan.
    3. Ben Bernanke & Frederic Mishkin, 1992. "Central Bank Behavior and the Strategy of Monetary Policy: Observations from Six Industrialized Countries," NBER Chapters, in: NBER Macroeconomics Annual 1992, Volume 7, pages 183-238, National Bureau of Economic Research, Inc.
    4. Miller, Marcus & Sutherland, Alan, 1991. "The "Walters Critique" of the EMS--A Case of Inconsistent Expectations?," The Manchester School of Economic & Social Studies, University of Manchester, vol. 59(0), pages 23-37, Supplemen.
    5. Frankel, Jeffrey & Phillips, Steven, 1992. "The European Monetary System: Credible at Last?," Oxford Economic Papers, Oxford University Press, vol. 44(4), pages 791-816, October.
    6. Richard Portes, 1993. "EMS and EMU After the Fall," The World Economy, Wiley Blackwell, vol. 16(1), pages 1-15, January.
    7. Giavazzi, Francesco & Spaventa, Luigi, 1990. "The `New' EMS," CEPR Discussion Papers 369, C.E.P.R. Discussion Papers.
    8. Rose, Andrew K. & Svensson, Lars E. O., 1994. "European exchange rate credibility before the fall," European Economic Review, Elsevier, vol. 38(6), pages 1185-1216, June.
    9. Barry Eichengreen & Charles Wyplosz, 1993. "The Unstable EMS," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 51-144.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Benoît Cœuré & Antoine Magnier, 1996. "Crédibilité et fondamentaux macro-économiques au sein du SME : un examen empirique," Économie et Prévision, Programme National Persée, vol. 123(2), pages 113-146.
    2. Patrick Artus & Claude Jessua, 1996. "La spéculation," Revue Économique, Programme National Persée, vol. 47(3), pages 409-424.
    3. Elias Belessakos & Michael Papaioannou, 1996. "Simple credibility tests of the ERM bands for the pound sterling and the Italian lira," Open Economies Review, Springer, vol. 7(3), pages 219-236, July.
    4. Barry Eichengreen, 2000. "The EMS Crisis in Retrospect," NBER Working Papers 8035, National Bureau of Economic Research, Inc.
    5. Olivier Jeanne, 1996. "Les modèles de crise de change : un essai de synthèse en relation avec la crise du franc de 1992-1993," Économie et Prévision, Programme National Persée, vol. 123(2), pages 147-162.
    6. Ozkan, F. Gulcin & Sutherland, Alan, 1998. "A currency crisis model with an optimising policymaker," Journal of International Economics, Elsevier, vol. 44(2), pages 339-364, April.
    7. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1994. "Speculative Attacks on Pegged Exchange Rates: An Empirical Exploration with Special Reference to the European Monetary System," CEPR Discussion Papers 1060, C.E.P.R. Discussion Papers.
    8. Jeanne, Olivier, 1997. "Are currency crises self-fulfilling?: A test," Journal of International Economics, Elsevier, vol. 43(3-4), pages 263-286, November.
    9. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
    10. Brana, Sophie & Chenaf-Nicet, Dalila, 2001. "Indicateurs avancés de crise de change : un examen critique," L'Actualité Economique, Société Canadienne de Science Economique, vol. 77(4), pages 569-592, décembre.
    11. Dooley, Michael P., 1997. "Financial Liberalization and Policy Challenges," IDB Publications (Working Papers) 6075, Inter-American Development Bank.
    12. Eichengreen, Barry, 1994. "Deja Vu All Over Again: Lessons from the Gold Standard for European Monetary Unification," Center for International and Development Economics Research (CIDER) Working Papers 233215, University of California-Berkeley, Department of Economics.
    13. Chinn, Menzie David & Dooley, Michael P., 1999. "International monetary arrangements in the Asia-Pacific before and after," Journal of Asian Economics, Elsevier, vol. 10(3), pages 361-384.
    14. Barry Eichengreen., 1993. "International Monetary Arrangements for the 21st Century," Center for International and Development Economics Research (CIDER) Working Papers C93-021, University of California at Berkeley.
    15. Volz, Ulrich, 2005. "Pegs, Baskets, and the Importance of Policy Credibility: Lessons of the 1992-93 ERM Crisis," HWWA Discussion Papers 323, Hamburg Institute of International Economics (HWWA).
    16. Barry Eichengreen., 1993. "The Crisis in the EMS and the Transition to EMU: An Interim Assessment," Center for International and Development Economics Research (CIDER) Working Papers C93-022, University of California at Berkeley.
    17. Volz, Ulrich, 2006. "On the feasibility of a regional exchange rate system for East Asia: Lessons of the 1992/1993 EMS crisis," Journal of Asian Economics, Elsevier, vol. 17(6), pages 1107-1127, December.
    18. Hefeker, Carsten, 1994. "GMU, EMU, and the Bundesbank: The political economy of recent EMS-crises," Discussion Papers, Series II 221, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    19. Bettina Becker & Stephen G. Hall, 2009. "A new look at economic convergence in Europe: a common factor approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(1), pages 85-97.
    20. Peter Kenen, 1996. "Analyzing and managing exchange-rate crises," Open Economies Review, Springer, vol. 7(1), pages 469-492, March.

    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:38:y:1994:i:3-4:p:447-468. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eer .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.