Does inflation targeting lead to excessive exchange rate volatility?

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dc.contributor.author Þórarinn Gunnar Pétursson 1966 is
dc.date.accessioned 2013-12-20T14:01:38Z
dc.date.available 2013-12-20T14:01:38Z
dc.date.issued 2009-10
dc.identifier.issn 1028-9445
dc.identifier.uri http://hdl.handle.net/10802/4776
dc.description Myndefni: töflur is
dc.description.abstract This paper analysis whether the adoption of inflation targeting affects excessive exchange rate volatility, i.e. the share of exchange rate fluctuations not related to economic fundamentals. Using a signal-extraction approach to estimate this excessive volatility in multivariate exchange rates in a sample of forty-four countries, the empirical results show no systematic relationship between inflation targeting and excessive exchange rate volatility. Joint analysis of the effects of inflation targeting and EMU membership shows, however, that a membership in the monetary union significantly reduces this excessive volatility. Together, the results suggest that floating exchange rates not only serve as a shock absorber but are also an independent source of shocks, and that these excessive fluctuations in exchange rates can be reduced by joining a monetary union. At the same time the results suggest that adopting inflation targeting does not by itself contribute to excessive exchange rate volatility. en
dc.format.extent 32 s. is
dc.language.iso en
dc.publisher Central Bank of Iceland, Economics Department is
dc.relation.ispartofseries Central Bank of Iceland., Working papers ; 43
dc.relation.uri http://www.sedlabanki.is/lisalib/getfile.aspx?itemid=7333
dc.subject Verðbólga is
dc.subject Gengismál is
dc.title Does inflation targeting lead to excessive exchange rate volatility? en
dc.type Skýrsla is
dc.identifier.gegnir 991008687199706886


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