Menu Expand

Cite JOURNAL ARTICLE

Style

Spahn, H. Glaubwürdigkeit, Zeitinkonsistenz und Zinsdifferenzen in einem System fester Wechselkurse. Credit and Capital Markets – Kredit und Kapital, 29(4), 511-527. https://doi.org/10.3790/ccm.29.4.511
Spahn, Heinz-Peter "Glaubwürdigkeit, Zeitinkonsistenz und Zinsdifferenzen in einem System fester Wechselkurse" Credit and Capital Markets – Kredit und Kapital 29.4, 1996, 511-527. https://doi.org/10.3790/ccm.29.4.511
Spahn, Heinz-Peter (1996): Glaubwürdigkeit, Zeitinkonsistenz und Zinsdifferenzen in einem System fester Wechselkurse, in: Credit and Capital Markets – Kredit und Kapital, vol. 29, iss. 4, 511-527, [online] https://doi.org/10.3790/ccm.29.4.511

Format

Glaubwürdigkeit, Zeitinkonsistenz und Zinsdifferenzen in einem System fester Wechselkurse

Spahn, Heinz-Peter

Credit and Capital Markets – Kredit und Kapital, Vol. 29 (1996), Iss. 4 : pp. 511–527

Additional Information

Article Details

Author Details

Heinz-Peter Spahn, Stuttgart-Hohenheim

References

  1. Artis, M., 1991: Monetary Policy and the Exchange Rate. Oxford Review of Economic Policy, 7, 3, 128 - 138.  Google Scholar
  2. Barro, R. J./Gordon, D. B., 1983: Rules, Discretion and Reputation in a Model of Monetary Policy. Journal of Monetary Economics, 12, 101-121.  Google Scholar
  3. Blackburn, K./Christensen, M., 1989: Monetary Policy and Credibility. Theories and Evidence. Journal of Economic Literatur, 27, 1-45.  Google Scholar

Abstract

Credibility, Time Inconsistency and Interest Rate Differences in a Fixed Exchange Rate System

The Barro-Gordon model can be applied to an open economy. If the welfare function of the economic policy agent exhibits a preference for the target of employment, the promise to keep a fixed exchange rate is not credible as a devaluation enhances employment in case of lagging exchange rate expectations. In anticipation of a cheating of national policy makers devaluation expectations emerge causing interest differences between financial assets denominated in different currencies. Accordingly, economic policy has to choose between two unfavourable alternatives: to defend the fixed exchange rate by means of high interest rates causing employment losses or to execute an already expected devaluation aggravating the risk of inflation. Interest rate differences and currency crises in the EMS can be conceived as partly failed attempts to base economic and monetary policies on long-term targets and commitments.