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Inflation targeting or fear of floating in disguise? A broader perspective

  • Ball, Christopher P.
  • Reyes, Javier

Calvo and Reinhart [Calvo, G., Reinhart, C., 2002. Fear of floating. Quarterly Journal of Economics 117, 379-408] argue that many countries claim to float but actually display a "fear of floating" (FF) and that credible inflation targeting (IT) and FF are identical regimes. We analyze exchange rates, reserves, interest rates and inflation across 88 exchange rate regimes for 20 countries. We find IT is empirically distinguishable from fixed, floating, managed floating, and FF regimes. Credible IT appears to be more similar to floating and managed floating than to fixing or FF. Being able to identify these regimes accurately allows one to distinguish between cases where countries claim to IT but actually FF.

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File URL: http://www.sciencedirect.com/science/article/B6X4M-4NC50CH-1/1/b09827f55e833e7fbce3b03d674cb1af
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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 30 (2008)
Issue (Month): 1 (March)
Pages: 308-326

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Handle: RePEc:eee:jmacro:v:30:y:2008:i:1:p:308-326
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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  1. Pierre-Richard Agénor, 2001. "Monetary Policy Under Flexible Exchange Rates: an Introduction to Inflation Targeting," Working Papers Central Bank of Chile 124, Central Bank of Chile.
  2. Thomas Willett, 2003. "Fear of Floating Needn't Imply Fixed Rates: An OCA Approach to the Operation of Stable Intermediate Currency Regimes," Open Economies Review, Springer, vol. 14(1), pages 71-91, January.
  3. corrinne ho & robert n mccauley, 2004. "Living with flexible exchange rates:," International Finance 0411003, EconWPA.
  4. Lars E O Svensson, 1996. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," Bank of England working papers 56, Bank of England.
  5. Reinhart, Carmen, 2001. "Fear of Floating: Exchange Rate Flexibility Indices," MPRA Paper 13196, University Library of Munich, Germany.
  6. Isriya Nitithanprapas & Thomas D. Willett, 2002. "Classifying Exchange Rate Regimes," Claremont Colleges Working Papers 2002-22, Claremont Colleges.
  7. Barry Eichengreen, 2002. "Can Emerging Markets Float? Should They Inflation Target?," Working Papers Series 36, Central Bank of Brazil, Research Department.
  8. Reinhart, Carmen, 2002. "A Modern History of Exchange Rate Arrangements: The Country Histories, 1946-2001," MPRA Paper 13191, University Library of Munich, Germany.
  9. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 1-48, February.
  10. Sebastian Edwards, 2006. "The Relationship Between Exchange Rates and Inflation Targeting Revisited," NBER Working Papers 12163, National Bureau of Economic Research, Inc.
  11. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers 7993, National Bureau of Economic Research, Inc.
  12. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
  13. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Vegh, 2004. "When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Working Papers 10780, National Bureau of Economic Research, Inc.
  14. Justin M. Dubas & Byung-Joo Lee & Nelson C. Mark, 2005. "Effective Exchange Rate Classifications and Growth," NBER Working Papers 11272, National Bureau of Economic Research, Inc.
  15. Christopher P. Ball & Javier Reyes, 2004. "Inflation targeting or fear of floating in disguise: the case of Mexico," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(1), pages 49-69.
  16. Frederic S. Mishkin, 2004. "Can Inflation Targeting Work in Emerging Market Countries?," NBER Working Papers 10646, National Bureau of Economic Research, Inc.
  17. Amartya Lahiri & Carlos A. Vegh, 2001. "Living with the Fear of Floating: An Optimal Policy Perspective," NBER Working Papers 8391, National Bureau of Economic Research, Inc.
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