World Inflation Under Flexible Exchange Rates

Emil-Maria Claassen
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Emil-Maria Claassen: University of Paris-Dauphine

A chapter in Flexible Exchange Rates and Stabilization Policy, 1977, pp 214-233 from Palgrave Macmillan

Abstract: Abstract Under flexible exchange rates, world inflation is the weighted average of the national inflation rates. This paper is concerned with two categories of arguments which emphasize the higher probability of a higher inflation bias in a system of flexible exchange rates. The first category refers to a country’s lower inflationary discipline when it has adopted a floating exchange rate and the second category of arguments concerns either price rigidities which become virulent qua the system of flexible exchange rates or some automatic world price level increases following the introduction of floating exchange rates. The paper leads to the conclusion that flexible exchange rates are neither inherently more inflationary nor inherently less inflationary than fixed exchange rates.

Keywords: Exchange Rate; Monetary Policy; Inflation Rate; Money Supply; Nominal Interest Rate (search for similar items in EconPapers)
Date: 1977
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-03359-1_19

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DOI: 10.1007/978-1-349-03359-1_19

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