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Construction and Assessment of a Mixed Exchange Policy Indicator: Explanation of Polish Inflation

Listed author(s):
  • Samuel GUERINEAU

    ()

    (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

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    The impact of exchange policy on macroeconomic targets (growth, inflation…) is rather difficult to assess empirically. There is a lack of accurate quantitative tools to define the strategy used, then a dummy variable (fixed or floating rate) is generally used in econometric studies. This paper tries to provide an indicator to measure the trade-off between nominal anchor and real target strategies in open economies. Unlike traditional dummies, it allows a mixed strategy (generally observed) in the managing of the exchange rate, according to external and internal constraints. The analysis of Poland's exchange policy since 1990 shows this trade-off, since monetary authorities have softened their nominal anchor policy to avoid excessive real appreciation. An econometric estimation of Polish inflation is used to test the validity of the indicator suggested. The results confirm not only the classical determinants of inflation, but also the validity of our mixed exchange policy indicator.

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    File URL: http://publi.cerdi.org/ed/1998/1998.18.pdf
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    Paper provided by CERDI in its series Working Papers with number 199818.

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    Length: 16
    Date of creation: 1998
    Handle: RePEc:cdi:wpaper:86
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    1. Carlos A. Végh Gramont & Ratna Sahay, 1995. "Inflation and Stabilization in Transition Economies; A Comparison with Market Economies," IMF Working Papers 95/8, International Monetary Fund.
    2. Stanislaw Gomulka, 1998. "Managing capital flows in Poland, 1995-98," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 6(2), pages 389-396, November.
    3. Calvo, Guillermo A. & Reinhart, Carmen M. & Vegh, Carlos A., 1995. "Targeting the real exchange rate: theory and evidence," Journal of Development Economics, Elsevier, vol. 47(1), pages 97-133, June.
    4. Éric Girardin, 1994. "La politique de change dans les pays d'Europe centrale," Revue Économique, Programme National Persée, vol. 45(3), pages 589-600.
    5. Szapary, Gyorgy & Jakab, Zoltan M., 1998. "Exchange Rate Policy in Transition Economies: The Case of Hungary," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 691-717, December.
    6. László Halpern & Charles Wyplosz, 1997. "Equilibrium Exchange Rates in Transition Economies," IMF Staff Papers, Palgrave Macmillan, vol. 44(4), pages 430-461, December.
    7. Corden, W Max, 1993. "Exchange Rate Policies for Developing Countries," Economic Journal, Royal Economic Society, vol. 103(416), pages 198-207, January.
    8. Drabek, Zdenek & Brada, Josef C., 1998. "Exchange Rate Regimes and the Stability of Trade Policy in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 642-668, December.
    9. Atta, J K & Jefferis, K R & Mannathoko, I, 1996. "Small Country Experiences with Exchange Rates and Inflation: The Case of Botswana," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 5(2), pages 293-326, June.
    10. Dariusz Rosati, 1996. "Exchange rate policies during transition from plan to market," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(1), pages 159-184, May.
    11. de Melo, Martha & Denizer, Cevdet & Gelb, Alan, 1996. "From plan to market : patterns of transition," Policy Research Working Paper Series 1564, The World Bank.
    12. Desai, Padma, 1998. "Macroeconomic Fragility and Exchange Rate Vulnerability: A Cautionary Record of Transition Economies," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 621-641, December.
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