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Currency Regime and Monetary Autonomy. Empirical Evidence Using Recent and Global Data from 1990 to 2007


  • Hiroyuki Taguchi


This paper analyzes the exchange rate regimes from the perspective of monetary independence. To be specific, using recent and global data, we examine the sensitivity of domestic interest rates to the international interest rate, by conducting co-integration tests and by estimating the adjustment speeds through error-correction model, for different de facto currency regimes and for different types of capital markets. Our estimation results basically support the traditional views of ‘impossible trinity’, as far as the cases with open capital markets are concerned. The floating regime shows the less sensitivity of domestic interest rates to the international interest rate than the fixed regime does, which implies some capacity for domestic monetary autonomy under the floating regime. The cases with closed capital markets, on the other hand, include the cases showing high sensitivity of interest rates in some emerging market economies, which might imply the ‘fear of floating’ hypothesis.

Suggested Citation

  • Hiroyuki Taguchi, 2010. "Currency Regime and Monetary Autonomy. Empirical Evidence Using Recent and Global Data from 1990 to 2007," International Economic Journal, Taylor & Francis Journals, vol. 25(3), pages 341-358, October.
  • Handle: RePEc:taf:intecj:v:25:y:2011:i:3:p:341-358 DOI: 10.1080/10168737.2011.607255

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    References listed on IDEAS

    1. Chou, Chien-fu & Shy, Oz, 1990. "Network effects without network externalities," International Journal of Industrial Organization, Elsevier, vol. 8(2), pages 259-270, June.
    2. Toru Kikuchi, 2007. "Network Externalities And Comparative Advantage," Bulletin of Economic Research, Wiley Blackwell, vol. 59(4), pages 327-337, October.
    3. Kazumichi Iwasa & Toru Kikuchi, 2011. "Software Provision and the Impact of Market Integration," Review of International Economics, Wiley Blackwell, vol. 19(4), pages 685-696, September.
    4. Chou, Chien-fu & Shy, Oz, 1996. "Do consumers gain or lose when more people buy the same brand," European Journal of Political Economy, Elsevier, vol. 12(2), pages 309-330, September.
    5. Iwasa, Kazumichi & Kikuchi, Toru, 2008. "Software Provision and the Impact of Market Integration: A Note," MPRA Paper 9315, University Library of Munich, Germany.
    6. Toru Kikuchi, 2005. "Interconnected communications networks and home market effects," Canadian Journal of Economics, Canadian Economics Association, vol. 38(3), pages 870-882, August.
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    Cited by:

    1. Taguchi, Hiroyuki & Kato, Chizuru, 2011. "東アジア諸国のインフレターゲットと日本への示唆
      [Inflation targeting in east Asia economies and its implication to Japan]
      ," MPRA Paper 64407, University Library of Munich, Germany.
    2. Taguchi, Hiroyuki, 2011. "Monetary autonomy in emerging market economies: The role of foreign reserves," Emerging Markets Review, Elsevier, vol. 12(4), pages 371-388.

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