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A New Taxonomy of Monetary Regimes

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  • Ashok Bhundia
  • Mark R. Stone

Abstract

This paper proposes a new taxonomy of monetary regimes defined by the choice and clarity of the nominal anchor. The regimes are as follows: (i) monetary nonautonomy, (ii) weak anchor, (iii) money anchor, (iv) exchange rate peg, (v) full-fledged inflation targeting, (vi) implicit price stability anchor, and (vii) inflation targeting lite. This taxonomy captures the commitment-discretion tradeoffs that lie at the heart of choosing a monetary regime. During the last 15 years the world has moved toward monetary regimes with less discretion. Empirical analysis suggests that country regime choices reflect the level of financial and economic development and recent inflation history.

Suggested Citation

  • Ashok Bhundia & Mark R. Stone, 2004. "A New Taxonomy of Monetary Regimes," IMF Working Papers 04/191, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:04/191
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    References listed on IDEAS

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    1. Carare, Alina & Stone, Mark R., 2006. "Inflation targeting regimes," European Economic Review, Elsevier, vol. 50(5), pages 1297-1315, July.
    2. Mark R. Stone, 2003. "Inflation Targeting Lite," IMF Working Papers 03/12, International Monetary Fund.
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    Cited by:

    1. Rose, Andrew K., 2014. "Surprising similarities: Recent monetary regimes of small economies," Journal of International Money and Finance, Elsevier, vol. 49(PA), pages 5-27.
    2. Mark R. Stone & Etienne B Yehoue & Kotaro Ishi, 2009. "Unconventional Central Bank Measures for Emerging Economies," IMF Working Papers 09/226, International Monetary Fund.
    3. Pavasuthipaisit, Robert, 2010. "Should inflation-targeting central banks respond to exchange rate movements?," Journal of International Money and Finance, Elsevier, vol. 29(3), pages 460-485, April.
    4. Peter J. Morgan, 2013. "Monetary Policy Frameworks in Asia : Experience, Lessons, and Issues," Finance Working Papers 23639, East Asian Bureau of Economic Research.
    5. Douglas Laxton & Andrew Berg & Philippe D Karam, 2006. "A Practical Model-Based Approach to Monetary Policy Analysis—Overview," IMF Working Papers 06/80, International Monetary Fund.
    6. Chung, Jaesik & Jung, Yongseung & Yang, Doo Yong, 2007. "Optimal monetary policy in a small open economy: The case of Korea," Journal of Asian Economics, Elsevier, vol. 18(1), pages 125-143, February.
    7. Carlos A. Carrasco & Jesús Ferreiro, 2011. "Inflation Targeting and Economic Performance: The Case of Mexico," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(5), pages 675-692, December.
    8. Kotaro Ishi & Kenji Fujita & Mark R. Stone, 2011. "Should Unconventional Balance Sheet Policies Be Added to the Central Bank toolkit? a Review of the Experience so Far," IMF Working Papers 11/145, International Monetary Fund.
    9. Kim, Soyoung & Yang, Doo Yong, 2009. "International Monetary Transmission and Exchange Rate Regimes: Floaters vs. Non-Floaters," ADBI Working Papers 181, Asian Development Bank Institute.
    10. Martín Redrado & Jorge Carrera & Diego Bastourre & Javier Ibarlucia (ed.), 2006. "The Economic Policy of Foreign Reserve Accumulation: New International Evidence," BCRA Paper Series, Central Bank of Argentina, Economic Research Department, number 02, December.
    11. Martín Redrado & Jorge Carrera & Diego Bastourre & Javier Ibarlucia, 2006. "The Economic Policy of Foreign Reserve Accumulation: New International Evidence," BCRA Working Paper Series 200614, Central Bank of Argentina, Economic Research Department.
    12. Francisco Ledesma-Rodriguez & Manuel Navarro-Ibanez & Jorge Perez-Rodriguez & Simon Sosvilla-Rivero, 2007. "Implicit bands in the Spanish peseta/Deutschmark exchange rate, 1965-1998," Applied Financial Economics, Taylor & Francis Journals, vol. 17(11), pages 921-932.
    13. Carlos Carrasco & Jesus Ferreiro, 2013. "Inflation targeting in Mexico," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 35(3), pages 341-372.
    14. Kovács, Mihály András, 2007. "Mit csinál a monetáris politika az inflációs célkövetés rendszerében?. Észrevételek Erdős Tibor Árfolyam-politika és inflációs célkövetés Magyarországon című írásához
      [What does monetary policy do
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1103-1120.
    15. repec:dgr:rugsom:12011-eef is not listed on IDEAS
    16. Moinuddin, 2007. "Choice of Monetary Policy Regime: Should SBP Adopt Inflation Targeting," SBP Working Paper Series 19, State Bank of Pakistan, Research Department.
    17. Samarina, A.., 2012. "Monetary targeting and financial system characteristics," Research Report 12011-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    18. Rose, Andrew K. & Mihov, Ilian, 2008. "Is Old Money Better than New? Duration and Monetary Regimes," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 2, pages 1-24.
    19. Pablo Mendieta Ossio & Hugo Rodriguez Gonzales, 2005. "Interacción de la política fiscal con la política monetaria en el MERCOSUR y países asociados," Revista de Análisis del BCB, Banco Central de Bolivia, vol. 8(1), pages 49-97, December.
    20. Alvaro Angeriz & Philip Arestis, 2007. "Assessing the Performance of 'Inflation Targeting Lite' Countries," The World Economy, Wiley Blackwell, vol. 30(11), pages 1621-1645, November.
    21. Horacio Aguirre & Tamara Burdisso, 2008. "Dangerous Liaisons? An Empirical Assessment of Inflation Targeting and Exchange Rate Regimes," BCRA Working Paper Series 200839, Central Bank of Argentina, Economic Research Department.
    22. Kim, Soyoung & Yang, Doo Yong, 2012. "International monetary transmission in East Asia: Floaters, non-floaters, and capital controls," Japan and the World Economy, Elsevier, vol. 24(4), pages 305-316.

    More about this item

    Keywords

    Central banks and their policies; Exchange rate policy; Monetary policy; Transparency; monetary regime; inflation; inflation targeting; price stability; monetary regimes;

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