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Indirect convertibility as a money rule for inflation targeting

  • J. S. Ferris
  • J. A. Galbraith

In this paper we re-examine the case for Indirect Convertibility made by Greenfield and Yeager (1983, 1989) as a mechanism for promoting greater internal price level stability. We argue that with some reinterpretation, indirect convertibility can be interpreted as a convenient, practical monetary policy rule by which central banks engaged in inflation targeting can better achieve their price stabilization goals. It also implies that the more general acceptance of indirect convertibility by a set of countries pursuing a common inflation target would better coordinate group success and by doing so could form an important intermediate step in coordinating the adoption of a common currency

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Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 13 (2003)
Issue (Month): 10 ()
Pages: 753-761

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Handle: RePEc:taf:apfiec:v:13:y:2003:i:10:p:753-761
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  1. Sumner, Scott, 1997. "Can Monetary Stabilization Policy Be Improved by CPI Futures Targeting? Reply," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(4), pages 542-45, November.
  2. Pierre L. Siklos, 1999. "Inflation-target design: changing inflation performance and persistence in industrial countries," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 46-58.
  3. Sumner, Scott, 1995. "The Impact of Futures Price Targeting on the Precision and Credibility of Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 89-106, February.
  4. Dowd, Kevin, 1995. "The Mechanics of Indirect Convertibility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 67-88, February.
  5. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  6. Selgin, G.A. & White, L.H., 1993. "How Would the Invisible Hand Handle Money?," Papers 380e, Georgia - College of Business Administration, Department of Economics.
  7. Bennett T. McCallum, 1999. "Recent developments in the analysis of monetary policy rules," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 3-12.
  8. Greenfield, Robert L & Yeager, Leland B, 1983. "A Laissez-Faire Approach to Monetary Stability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(3), pages 302-15, August.
  9. William Poole, 1999. "Monetary policy rules?," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 3-12.
  10. Schnadt, Norbert & Whittaker, John, 1993. "Inflation-Proof Currency? The Feasibility of Variable Commodity Standards," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 214-21, May.
  11. John C. Williams, 1999. "Simple rules for monetary policy," Finance and Economics Discussion Series 1999-12, Board of Governors of the Federal Reserve System (U.S.).
  12. Patinkin, Don, 1996. "Indirect Convertibility and Irving Fisher's Compensated Dollar: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 130-31, February.
  13. Garrison, Roger W & White, Lawrence H, 1997. "Can Monetary Stabilization Policy Be Improved by CPI Futures Targeting? A Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(4), pages 535-41, November.
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