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| Author: | Herrendorf, B. |
| Title: | Importing credibility through exchange rate pegging |
| Journal: | Economic Journal
1997 : MAY, VOL. 107:442, p. 687-694 |
| Index terms: | EXCHANGE RATES MONETARY POLICY POLICY MAKING OPEN ECONOMY CREDIT |
| Language: | eng |
| Abstract: | This article addresses the question of why exchange rate pegging could give the best reputational equilibrium, though reputational effects can also discipline domestic monetary policy making under a float. The article argues that the reason is in the imperfect controllability of inflation under a float, which leads to a private information problem absent under exchange rate pegging. Low precision in domestic inflation control is one important motivation to peg the exchange rate. |
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