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The Stabilizing Properties of Floating Exchange Rates: Some International Evidence

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  • Bergvall, Anders

    () (Department of Economics)

Abstract

This paper analyzes the stabilizing properties of alternative monetary policy regimes. In practice there is a choice between two broad types of monetary policy regimes: a fixed exchange rate regime or a floating exchange rate regime. In this paper I compare exchange rate targeting with different floating exchange rate regimes: strict price level targeting, flexible price level targeting and output gap targeting. The paper also evaluates the actual choice of monetary policy regime for seven countries with a pure floating exchange rate regime. In most cases the actual regime can be described as flexible price level targeting. The results suggest that flexible and strict price level targeting gives lower real and nominal variability than both exchange rate targeting and output gap targeting.

Suggested Citation

  • Bergvall, Anders, 2002. "The Stabilizing Properties of Floating Exchange Rates: Some International Evidence," Working Paper Series 2002:14, Uppsala University, Department of Economics.
  • Handle: RePEc:hhs:uunewp:2002_014
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    References listed on IDEAS

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    4. Ohlsson, Henry & Vredin, Anders, 1996. " Political Cycles and Cyclical Policies," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(2), pages 203-218, June.
    5. Svensson, Lars E. O., 1999. "Inflation targeting as a monetary policy rule," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 607-654, June.
    6. Lafrance, Robert & Osakwe, Patrick & St-Amant, Pierre, 1998. "Evaluating Alternative Measures of the Real Effective Exchange Rate," Staff Working Papers 98-20, Bank of Canada.
    7. Paul Soderlind, 2004. "What if the Fed had been an inflation nutter?," Applied Economics, Taylor & Francis Journals, vol. 36(13), pages 1471-1473.
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    Cited by:

    1. Arnold, Ivo J.M., 2006. "Optimal regional biases in ECB interest rate setting," European Journal of Political Economy, Elsevier, vol. 22(2), pages 307-321, June.
    2. Gottfries, Nils, 2003. "Booms and Busts in EMU," Working Paper Series 2003:29, Uppsala University, Department of Economics.

    More about this item

    Keywords

    Monetary policy; exchange rates; macroeconomic stability;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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