Imported inflation and monetary policy
The present paper examines the thesis that monetary policy cannot be used as a weapon against domestic inflation in a surplus country under a regime of fixed exchange rates. The conditions under which the effective execution of domestic monetary policy is hampered by a balance-of-payments surplus ar...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Associazione Economia civile
2014-02-01
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| Series: | PSL Quarterly Review |
| Subjects: | |
| Online Access: | https://rosa.uniroma1.it/rosa04/psl_quarterly_review/article/view/11686 |
| _version_ | 1811172328130740224 |
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| author | I.O. Jr. SCOTT W.E. SCHMIDT |
| author_facet | I.O. Jr. SCOTT W.E. SCHMIDT |
| author_sort | I.O. Jr. SCOTT |
| collection | DOAJ |
| description | The present paper examines the thesis that monetary policy cannot be used as a weapon against domestic inflation in a surplus country under a regime of fixed exchange rates. The conditions under which the effective execution of domestic monetary policy is hampered by a balance-of-payments surplus are thus examined. The authors restrict their analysis to the case of a European country that is subjected to inflationary pressures because of a capital inflow from the United States. Two kinds of constraints are alleged to hinder the use of monetary policy, internal and external, both of which are considered in turn. The authors find that under certain conditions neither internal nor external constraints vitiate effective monetary action. Moreover, it is argued that the freedom of capital movements in a fixed exchange rate system necessarily eliminates the possibility of connecting national monetary policies.
JEL: E31, E42, E52, F32
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| first_indexed | 2024-04-10T17:28:09Z |
| format | Article |
| id | doaj.art-711670fe4a0041f0a4093e3087b44289 |
| institution | Directory Open Access Journal |
| issn | 2037-3635 2037-3643 |
| language | English |
| last_indexed | 2024-04-10T17:28:09Z |
| publishDate | 2014-02-01 |
| publisher | Associazione Economia civile |
| record_format | Article |
| series | PSL Quarterly Review |
| spelling | doaj.art-711670fe4a0041f0a4093e3087b442892023-02-03T16:51:22ZengAssociazione Economia civilePSL Quarterly Review2037-36352037-36432014-02-01177110.13133/2037-3643/11686Imported inflation and monetary policyI.O. Jr. SCOTTW.E. SCHMIDTThe present paper examines the thesis that monetary policy cannot be used as a weapon against domestic inflation in a surplus country under a regime of fixed exchange rates. The conditions under which the effective execution of domestic monetary policy is hampered by a balance-of-payments surplus are thus examined. The authors restrict their analysis to the case of a European country that is subjected to inflationary pressures because of a capital inflow from the United States. Two kinds of constraints are alleged to hinder the use of monetary policy, internal and external, both of which are considered in turn. The authors find that under certain conditions neither internal nor external constraints vitiate effective monetary action. Moreover, it is argued that the freedom of capital movements in a fixed exchange rate system necessarily eliminates the possibility of connecting national monetary policies. JEL: E31, E42, E52, F32 https://rosa.uniroma1.it/rosa04/psl_quarterly_review/article/view/11686Monetary policyinflationfixed exchange ratesbalance of payments surpluscapital movements |
| spellingShingle | I.O. Jr. SCOTT W.E. SCHMIDT Imported inflation and monetary policy PSL Quarterly Review Monetary policy inflation fixed exchange rates balance of payments surplus capital movements |
| title | Imported inflation and monetary policy |
| title_full | Imported inflation and monetary policy |
| title_fullStr | Imported inflation and monetary policy |
| title_full_unstemmed | Imported inflation and monetary policy |
| title_short | Imported inflation and monetary policy |
| title_sort | imported inflation and monetary policy |
| topic | Monetary policy inflation fixed exchange rates balance of payments surplus capital movements |
| url | https://rosa.uniroma1.it/rosa04/psl_quarterly_review/article/view/11686 |
| work_keys_str_mv | AT iojrscott importedinflationandmonetarypolicy AT weschmidt importedinflationandmonetarypolicy |