TY - JOUR
T1 - Are exchange rate bands better than fixed exchange rates? The imported credibility approach
AU - Coles, Melvyn
AU - Philippopoulos, Apostolis
PY - 1997/8
Y1 - 1997/8
N2 - This paper explicitly incorporates exchange rate bands into the Barro-Gordon model of inflation. This is a non-trivial extension. Focusing on Markov-perfect equilibria, we specify the properties of the optimal policy functions, exchange rate dynamics and hence the arguments for and against target zones. The attractiveness of alternative exchange rate regimes (i.e. fixed, flexible and target zones) and the position of exchange rates inside the band depend on the inflationary performance of the center country.
AB - This paper explicitly incorporates exchange rate bands into the Barro-Gordon model of inflation. This is a non-trivial extension. Focusing on Markov-perfect equilibria, we specify the properties of the optimal policy functions, exchange rate dynamics and hence the arguments for and against target zones. The attractiveness of alternative exchange rate regimes (i.e. fixed, flexible and target zones) and the position of exchange rates inside the band depend on the inflationary performance of the center country.
KW - Dynamic policy games
KW - Exchange rate bands
KW - Inflation
UR - http://www.scopus.com/inward/record.url?scp=0041634825&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=0041634825&partnerID=8YFLogxK
U2 - 10.1016/S0022-1996(96)01459-6
DO - 10.1016/S0022-1996(96)01459-6
M3 - Article
AN - SCOPUS:0041634825
SN - 0022-1996
VL - 43
SP - 133
EP - 153
JO - Journal of International Economics
JF - Journal of International Economics
IS - 1-2
ER -