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Exchange Rate Regimes and Shifts in Inflation Persistence: Does Nothing Else Matter?


  • Burdekin, Richard C K
  • Siklos, Pierre L


This paper reexamines the findings of George S. Alogoskoufis and Ron Smith (1991), who argue that sharp increases in inflation persistence can be attributed to changes in the exchange rate regime. Using long time series data from the United Kingdom, the United States, Canada, and Sweden, the authors suggest that these authors' emphasis on a post-1967 shift in inflation persistence is misplaced and that there are other equally good candidates to account for changes in inflation persistence, such as wars, oil price shocks, and central bank reforms. This conclusion is supported by recently developed tests that allow for multiple structural shifts at unknown dates.

Suggested Citation

  • Burdekin, Richard C K & Siklos, Pierre L, 1999. "Exchange Rate Regimes and Shifts in Inflation Persistence: Does Nothing Else Matter?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(2), pages 235-247, May.
  • Handle: RePEc:mcb:jmoncb:v:31:y:1999:i:2:p:235-47

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    References listed on IDEAS

    1. V. Vance Roley & Rick Troll, 1984. "The impact of discount rate changes on market interest rates," Economic Review, Federal Reserve Bank of Kansas City, issue Jan, pages 27-39.
    2. Smirlock, Michael J & Yawitz, Jess B, 1985. " Asset Returns, Discount Rate Changes, and Market Efficiency," Journal of Finance, American Finance Association, vol. 40(4), pages 1141-1158, September.
    3. Daniel L. Thornton, 1996. "The information content of discount rate announcements: what's behind the announcement effect?," Working Papers 1994-032, Federal Reserve Bank of St. Louis.
    4. Cook, Timothy & Hahn, Thomas, 1988. "The Information Content of Discount Rate Announcements and Their Effect on Market Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(2), pages 167-180, May.
    5. Batten, Dallas S. & Thornton, Daniel L., 1984. "Discount rate changes and the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 3(3), pages 279-292, December.
    6. Warren L. Smith, 1958. "The Discount Rate as a Credit-Control Weapon," Journal of Political Economy, University of Chicago Press, vol. 66, pages 171-171.
    7. Michael J. Dueker, 1992. "The response of market interest rates to discount rate changes," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 78-91.
    8. Edward C. Simmons, 1956. "A Note On The Revival Of Federal Reserve Discount Policy," Journal of Finance, American Finance Association, vol. 11(4), pages 413-421, December.
    9. Wagster, John, 1993. "The Information Content of Discount Rate Announcements Revisited: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 132-137, February.
    10. Goodfriend, Marvin, 1986. "Monetary mystique: Secrecy and central banking," Journal of Monetary Economics, Elsevier, vol. 17(1), pages 63-92, January.
    11. Waud, Roger N, 1970. "Public Interpretation of Federal Reserve Discount Rate Changes: Evidence on the 'Announcement Effect'," Econometrica, Econometric Society, vol. 38(2), pages 231-250, March.
    12. Hakkio, Craig S. & Pearce, Douglas K., 1992. "Discount rate policy under alternative operating procedures: An empirical investigation," International Review of Economics & Finance, Elsevier, vol. 1(1), pages 55-72.
    13. Robert V. Roosa, 1959. "Credit Policy at the Discount Window: Comment," The Quarterly Journal of Economics, Oxford University Press, vol. 73(2), pages 333-337.
    14. Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608, January.
    15. Mark Rush & Gordon H. Sellon & Li Zhu, 1994. "The role of the discount rate in monetary policy," Research Working Paper 94-01, Federal Reserve Bank of Kansas City.
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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions


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