Exchange-Rate Regimes, Inflation and Credibility: Evidence from Greece

George Alogoskoufis, Apostolis Philippopoulos and Vanghelis Vassilatos

Chapter 6 in Economic Integration, 2002, pp 91-102 from Palgrave Macmillan

Abstract: Abstract Recent theories of inflation stress how the limited ability of policy makers to commit themselves to price stability results in high inflation without any employment benefits. This has been shown by Barro and Gordon (1983) in a sequential move game between wage setters and a central bank along the Phillips curve. An important extension of this model is the exchange rate regime model of Giavazzi and Giovannini (1987) and Giavazzi and Pagano (1988). These authors have shown that participation in a regime of exchange rate commitments can give an institutional solution to the inefficient Barro-Gordon outcome.2 In particular, participation in a regime of fixed exchange rates, in which monetary policy is determined by an inflation-averse core country, ties the hands of domestic policy makers. This is reflected in wage-setters’ expectations, and so the domestic economy ends up with the same average inflation as the core country.3

Keywords: Exchange Rate; Monetary Policy; Unit Root; Exchange Rate Regime; Nominal Wage (search for similar items in EconPapers)
Date: 2002
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-62925-7_6

Ordering information: This item can be ordered from
http://www.palgrave.com/9780230629257

DOI: 10.1057/9780230629257_6

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().