Inflation and the Exchange Rate Regime

Warner Corden

A chapter in Flexible Exchange Rates and Stabilization Policy, 1977, pp 238-251 from Palgrave Macmillan

Abstract: Abstract Is a regime of fixed or of flexible rates more conducive to inflation? In a flexible rate regime the authorities of each country can choose whatever rate of inflation they wish. In the fixed rate system countries can depart from the world rate of inflation by running payments imbalances and will trade-off the costs of accommodating borrowing or lending against the benefits from getting closer to their desired inflation rates; inflation rates are then determined in a general equilibrium system where countries “trade” their surpluses and deficits. “Inflation-prone” countries are distinguished from the “inflation-shy”. Account is also taken of the special case of the reserve currency country.

Keywords: Inflation Rate; Exchange Rate Regime; Monetary Authority; Reserve Currency; Flexible Rate (search for similar items in EconPapers)
Date: 1977
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DOI: 10.1007/978-1-349-03359-1_21

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