Monetary Accommodation, Exchange Rate Regimes and Inflation Persistence

George Alogoskoufis

Economic Journal, 1992, vol. 102, issue 412, 461-80

Abstract: The author investigates the relation between the dynamics of inflation and international monetary and exchange-rate regimes. He uses an overlapping contracts model to demonstrate that regimes accommodating aggregate and relative price shocks result in higher persistence of global inflation and inflation differentials. The author presents evidence that fixed-exchange-rate regimes like the classical gold standard and Bretton Woods were associated with negligible accommodation and inflation persistence in contrast to managed-exchange-rate regimes. These results highlight the importance of monetary regimes for expectations and the behavior of wage and price setters. Copyright 1992 by Royal Economic Society.

Date: 1992
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Working Paper: Monetary Accommodation, Exchange Rate Regimes and Inflation Persistence (1991)
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