Fixed Exchange Rates as a Means to Price Stability: What Have We Learned

Lars Svensson

No 4504, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The paper discusses what we have learned from last year's currency crises in ERM and the Nordic countries about fixed exchange rates as a means to achieve price stability. After discussing the explanations for the crises, the paper concludes that fixed exchange rates are not a shortcut to price stability. Monetary stability and credibility have to be built at home and cannot easily be imported from abroad. Fixed exchange rates are more fragile and difficult to maintain than previously thought. They may even be in conflict with price stability, by inducing a procyclical destabilizing monetary policy, and by inducing an inflation bias. Building monetary credibility is even more important with flexible exchange rates.

JEL-codes: F31 F33 (search for similar items in EconPapers)
Date: 1993-10
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

Published as European Economic Review, vol. 38, no. 1, pp. 447-468, January 1994 EEA Alfred Marshall Lecture

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Journal Article: Fixed exchange rates as a means to price stability: What have we learned? (1994)
Working Paper: Fixed Exchange Rates as a Means to Price Stability: What Have We Learned? (1994)
Working Paper: Fixed Exchange Rates As a Means to Price Stability: What Have we Learned? (1993)
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