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Domestic pressures and the exchange rate regime: why economically bad decisions are politically popular?

  • H.P. GRÃœNER

    (University of Konstanz)

  • C. HEFEKER

    (University of Konstanz)

Every currency crisis brings with it a discussion on the optimal choice of the exchange rate regime. This literature is characterised by an exclusive focus on this single policy issue whilst taking other institutional choices as given. The authors attempt to develop an approach which incorporates a simultaneous choice of three major institutional elements that are germane to this issue and which affect social welfare.

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File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/10496/10383
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Article provided by Banca Nazionale del Lavoro in its journal BNL Quarterly Review.

Volume (Year): 48 (1995)
Issue (Month): 194 ()
Pages: 331-350

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Handle: RePEc:psl:bnlaqr:1995:34
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  1. Giavazzi, Francesco & Pagano, Marco, 1986. "The Advantages of Tying One's Hands: EMS Discipline and Central Bank Credibility," CEPR Discussion Papers 135, C.E.P.R. Discussion Papers.
  2. Grilli, Vittorio, 1989. "Exchange rates and seigniorage," European Economic Review, Elsevier, vol. 33(2-3), pages 580-587, March.
  3. Robert Flood & Michael Mussa, 1994. "Issues Concerning Nominal Anchors for Monetary Policy," NBER Working Papers 4850, National Bureau of Economic Research, Inc.
  4. Saint-Paul, G., 1994. "Some Political Aspects of Unemployment," DELTA Working Papers 94-03, DELTA (Ecole normale supérieure).
  5. Backus, David & Driffill, John, 1985. "Inflation and Reputation," American Economic Review, American Economic Association, vol. 75(3), pages 530-38, June.
  6. Hefeker, Carsten, 1995. "The political choice and collapse of fixed exchange rates," Discussion Papers, Series II 277, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
  7. Paul De Grauwe, 1993. "The Political Economy of Monetary Union in Europe," The World Economy, Wiley Blackwell, vol. 16(6), pages 653-661, November.
  8. Alberto Giovannini, 1993. "Bretton Woods and Its Precursors: Rules versus Discretion in the History of International Monetary Regimes," NBER Chapters, in: A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, pages 109-154 National Bureau of Economic Research, Inc.
  9. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-86, March.
  11. Eichengreen, B., 1992. "Should the Maastricht Treaty be Saved?," Princeton Studies in International Economics 74, International Economics Section, Departement of Economics Princeton University,.
  12. Gilles Saint-Paul, 1994. "Do Labor Market Rigidities Fulfill Distributive Objectives?: Searching for the Virtues of the European Model," IMF Staff Papers, Palgrave Macmillan, vol. 41(4), pages 624-642, December.
  13. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  14. Barry Eichengreen & Jeffry Frieden, 1993. "The Political Economy Of European Monetary Unification: An Analytical Introduction," Economics and Politics, Wiley Blackwell, vol. 5(2), pages 85-104, 07.
  15. Peree, Eric & Steinherr, Alfred, 1989. "Exchange rate uncertainty and foreign trade," European Economic Review, Elsevier, vol. 33(6), pages 1241-1264, July.
  16. Avinash Dixit, 1989. "Hysteresis, Import Penetration, and Exchange Rate Pass-Through," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 205-228.
  17. Gottfries, Nils & Horn, Henrik, 1987. "Wage Formation and the Persistence of Unemployment," Economic Journal, Royal Economic Society, vol. 97(388), pages 877-84, December.
  18. De Grauwe, Paul, 1993. "The Political Economy of Monetary Union in Europe," CEPR Discussion Papers 842, C.E.P.R. Discussion Papers.
  19. Casella, Alessandra, 1992. "On Markets and Clubs: Economic and Political Integration of Regions with Unequal Productivity," American Economic Review, American Economic Association, vol. 82(2), pages 115-21, May.
  20. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
  21. Vickers, John, 1986. "Signalling in a Model of Monetary Policy with Incomplete Information," Oxford Economic Papers, Oxford University Press, vol. 38(3), pages 443-55, November.
  22. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  23. Richard Baldwin & Paul Krugman, 1989. "Persistent Trade Effects of Large Exchange Rate Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 635-654.
  24. Vaubel, Roland, 1990. "Currency Competition and European Monetary Integration," Economic Journal, Royal Economic Society, vol. 100(402), pages 936-46, September.
  25. de Kock, Gabriel & Grilli, Vittorio, 1993. "Fiscal Policies and the Choice of Exchange Rate Regime," Economic Journal, Royal Economic Society, vol. 103(417), pages 347-58, March.
  26. Cohen, Daniel & Wyplosz, Charles, 1989. "The European Monetary Union: An Agnostic Evaluation," CEPR Discussion Papers 306, C.E.P.R. Discussion Papers.
  27. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
  28. Grüner, Hans Peter & Hefeker, Carsten, 1994. "Bank cooperation and banking policy in a monetary union: A political-economy perspective on EMU," Discussion Papers, Series II 238, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
  29. Wyplosz, Charles, 1989. "Asymmetry in the EMS: Intentional or systemic?," European Economic Review, Elsevier, vol. 33(2-3), pages 310-320, March.
  30. Bofinger, Peter, 1994. "Is Europe an Optimum Currency Area?," CEPR Discussion Papers 915, C.E.P.R. Discussion Papers.
  31. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
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