A presence of absence: The benign emergence of monetary stability

A presence of absence: The benign emergence of monetary stability

Using a panel of over 200 countries and 30 years of annual data since 1990, we find evidence of increasing durability in national monetary regimes. There are now three types of long-lived monetary systems. There have long been stable multilateral currency unions in the developing world, most notably...

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Bibliographic Details
Published in:Journal of international money and finance Vol. 146; p. 103125
Main Authors: Rose, A.K., Rose, A.I.G.
Format: Journal Article
Language:English
Published: Elsevier Ltd 01-08-2024
Subjects:
Currency
Exchange rate
Fixed
Flexible
Floating
Inflation
Regime
System
Target
Union
Regime
Target
Flexible
Inflation
F33
Currency
E58
Floating
Exchange rate
System
Union
Fixed
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Summary:Using a panel of over 200 countries and 30 years of annual data since 1990, we find evidence of increasing durability in national monetary regimes. There are now three types of long-lived monetary systems. There have long been stable multilateral currency unions in the developing world, most notably in the Caribbean and both Western and Central Africa; the advent of EMU has (re-)introduced monetary union to the rich countries of Western Europe. A large number of mostly small countries continue to have durably fixed exchange rates. Most dramatically, inflation-targeting has emerged as a third stable monetary regime. We document the decline in monetary instability across countries and discuss some of the slowly evolving causes. Rising monetary stability and the spread of inflation targeting has had benign consequences for business cycles, inflation, real exchange rate volatility, openness, and the incidence of financial crises.
ISSN:0261-5606
1873-0639
DOI:10.1016/j.jimonfin.2024.103125