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On the Link between Exchange-Rate Regimes and Monetary-Policy Autonomy: The European Experience

  • Forssbaeck, Jens

    (Institute of Economic Research)

  • Oxelheim, Lars


    (The Research Institute of Industrial Economics)

We investigate monetary-policy autonomy under different exchange-rate regimes in small, open European economies during the 1980s and 1990s. We find no systematic link between ex post monetary-policy autonomy and exchange rate regimes. This result is enforced for countries/periods with alternative nominal targets. Our interpretation of the results is that over the medium and long term following an ‘independent’ target for monetary policy, which does not deviate much from the targets of those countries to which one is closely financially integrated, is as constraining as locking the exchange rate to some particular level

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 637.

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Length: 39 pages
Date of creation: 15 Mar 2005
Date of revision:
Publication status: Published in The World Economy, 2006, pages 341-368.
Handle: RePEc:hhs:iuiwop:0637
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Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden

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  16. Jérôme Henry & Jens Weidmann, 1995. "Asymmetry in the EMS revisited: Evidence from the Causality Analysis of Daily Eurorates," Annals of Economics and Statistics, GENES, issue 40, pages 125-160.
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