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A New Taxonomy of Monetary Regimes

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  • Mr. Ashok Bhundia
  • Mr. 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

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

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    1. Klaus Schmidt-Hebbel & Matías Tapia, 2002. "Monetary Policy Implementation and Results in Twenty Inflation-Targeting Countries," Working Papers Central Bank of Chile 166, Central Bank of Chile.
    2. Guy Debelle, 1998. "Inflation Targeting in Practice," Occasional Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number occ23.
    3. Schmidt-Hebbel, Klaus & Tapia, Matias, 2002. "Inflation targeting in Chile," The North American Journal of Economics and Finance, Elsevier, vol. 13(2), pages 125-146, August.
    4. Mr. Carlo Cottarelli & Curzio Giannini, 1997. "Credibility Without Rules," IMF Occasional Papers 1997/007, International Monetary Fund.
    5. Carare, Alina & Stone, Mark R., 2006. "Inflation targeting regimes," European Economic Review, Elsevier, vol. 50(5), pages 1297-1315, July.
    6. Mr. Mark R. Stone, 2003. "Inflation Targeting Lite," IMF Working Papers 2003/012, International Monetary Fund.
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