In Search of an Anchor

2020 ◽  
pp. 251-274
Author(s):  
Einar Lie
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Executive Board ◽  
Inflation Target ◽  
Stable Level ◽  
Fixed Exchange Rate ◽  
The Government ◽  
New Guidelines

This chapter details how, in 1993, Norges Bank argued in favour of supplementing the fixed exchange rate target, and in 1997 in favour of replacing it with an inflation target, with a view to maintaining inflation at a low and stable level. The introduction of an inflation target provided Norges Bank with greater scope for the exercise of independent judgement. Controversial increases in the policy rate in 2000 and 2002 demonstrated that Norges Bank was willing to use its increased independence. Moreover, amendments to the Norges Bank Act in 2003 weakened the scope of action available to the government and parliament to influence the bank’s decisions, and the Executive Board largely became a council of economic experts. In addition, Norway’s slightly inefficient central bank organization underwent major changes, with extensive outsourcing of non-core tasks, as defined by the new guidelines.

scholarly journals The Success of Currency Reforms to End Great Inflations: An Empirical Analysis of 34 High Inflations

2009 ◽  
Vol 10 (2) ◽  
pp. 165-175 ◽  
Author(s):  
Peter Bernholz ◽  
Peter Kugler
Keyword(s):  
Twentieth Century ◽  
Exchange Rate ◽  
Central Bank ◽  
Empirical Analysis ◽  
Probit Model ◽  
Ordered Probit ◽  
Ordered Probit Model ◽  
Market Economies ◽  
Fixed Exchange Rate ◽  
Currency Reform

Abstract The estimation of an ordered probit model for currency reforms attempting to end 31 hyperinflations and three huge inflations of the twentieth century shows that the introduction of an independent central bank and the adoption of a credibly fixed exchange rate are crucial for the success of a currency reform. In addition, currency reforms are demonstrated to be more difficult in centrally planned economies than in market economies.

Brazilian Inflation from 1980 to 1993: Causes, Consequences and Dynamics

1996 ◽  
Vol 28 (3) ◽  
pp. 635-666 ◽  
Author(s):  
G. Tullio ◽  
M. Ronci
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Central Bank Independence ◽  
Budget Deficits ◽  
The Government ◽  
Exchange Rate Shocks

AbstractThis article focuses on Brazilian inflation: its causes, consequences and dynamics from 1980 to 1993. We argue that the main economic cause of the Brazilian inflation was the excessive growth of money, in turn caused by too high budget deficits. Oil and exchange rate shocks also played a role, together with the greater dependence of the Central Bank of Brazil on the government. We measure the degree of Central Bank independence by the variable ‘turnover’ of Central Bank governors defined as the number of months in office. The effect of this variable on inflation is found to be highly significant and positive.

scholarly journals International Monetary Frameworks

2021 ◽  
pp. 101-121
Author(s):  
Ulrich Bindseil ◽  
Alessio Fotia
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Foreign Currency ◽  
Balance Sheet ◽  
Lender Of Last Resort ◽  
Balance Sheets ◽  
Fixed Exchange Rate ◽  
International Monetary Arrangements ◽  
Recent Developments ◽  
Bank Balance Sheets

AbstractIn this chapter we turn to representing flows of funds in alternative international monetary frameworks, and what global liquidity these different frameworks provide. We first recall some arguments in favour of and against fixed exchange rate systems. We then introduce two international monetary arrangements of the past which imply fixed exchange rates, namely the gold standard and the Bretton Woods system, and recall why both eventually failed. We then turn to three international monetary frameworks in the context of the current paper standard, i.e. fixed exchange rate systems, flexible exchange rate systems, and the European monetary union. We explain the role of an international lender of last resort and related solutions, and how these allow for more leeway in running fixed exchange rate systems. We also show how banks and central bank balance sheets are affected by international flows of funds and the balance of payments. Finally, we briefly review recent developments of foreign currency reserves, being the key central bank balance sheet position in this context.

Iran may abandon austerity to pacify protesters

2018 ◽  
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Foreign Investment ◽  
Status Quo ◽  
Small Scale ◽  
Economic Policies ◽  
Content Type ◽  
The Poor ◽  
The Status ◽  
The Government

Significance Beginning in the conservative city of Mashhad, the mostly small-scale and leaderless demonstrations spread across many provincial towns over several days, sometimes turning violent. Following the publication of President Hassan Rouhani’s proposed 2018/19 ‘austerity’ budget, key slogans protested government corruption and neglect of the poor and unemployed -- although the basis of the regime itself also came under fire. Impacts US support for the protesters and announcement of new sanctions will assist Tehran’s efforts to portray recent events as foreign ‘sedition’. Inflation could spike on the back of populist economic policies and exchange rate deterioration as foreign investment prospects recede. The central bank will not implement exchange rate unification plans, since the government profits from the status quo.

Central-Bank ‘Distress’ and Hyperinflation in Argentina, 1989–90

1995 ◽  
Vol 27 (3) ◽  
pp. 663-682 ◽  
Author(s):  
Paul Beckerman
Keyword(s):  
Exchange Rate ◽  
Public Sector ◽  
Central Bank ◽  
Financial Markets ◽  
Interest Rates ◽  
Monetary Policies ◽  
The Public ◽  
Domestic Debt ◽  
Outstanding Debt ◽  
The Government

AbstractThe essential explanation of Argentina's 1989 hyperinflations is that the stabilisation programmes immediately preceding them drove the public sector in particular, the central bank – into ‘debt distress.’ These stabilisation programmes sought to anchor prices on an appreciated exchange rate, sustained by tight monetary policies that maintained high interest rates. The problem was that the government and the central bank had heavy domestic-debt burdens, and their combined interest bill far exceeded their non-interest surplus. To finance the interest without creating money, the government and central bank had to add continually to the outstanding debt stock as they capitalised the interest due. The debt swelled, and interest rates were pressured upward. Heavy pressure against the exchange rate, devaluation and hyperinflation then ensued when the public-sector debt stock exceeded what financial markets could be persuaded to hold at reasonable interest rates.

Political System Transparency and Monetary Commitment Regimes

2002 ◽  
Vol 56 (4) ◽  
pp. 861-887 ◽  
Author(s):  
J. Lawrence Broz
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Exchange Rates ◽  
Political System ◽  
Political Process ◽  
The Political ◽  
Political Systems ◽  
Fixed Exchange Rates ◽  
Government Interference ◽  
The Government

Central bank independence (CBI) and fixed exchange rates are alternative monetary commitments that differ in transparency. While CBI is opaque and difficult to monitor, a commitment to a fixed exchange rate is easily observed. Political systems also vary in terms of transparency. I argue that the transparency of monetary commitments and the transparency of political systems are substitutes. Where political decision making is opaque (autocracies), governments must look to a commitment that is more transparent and constrained (fixed exchange rates) than the government itself. The transparency of the monetary commitment substitutes for the transparency of the political system to engender low inflation. Where the political process is transparent (democracies), a formal commitment to CBI can produce lower inflation because private agents and the political opposition are free to detect and punish government interference with the central bank. Statistical results indicate that (1) autocracies are more likely to adopt exchange-rate pegs than democracies, and (2) CBI is effective in limiting inflation in nations with high levels of political transparency.

The Foreign Currency Exchange Rate Policy Up Until 1986

2020 ◽  
pp. 209-229
Author(s):  
Einar Lie
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Foreign Currency ◽  
Exchange Rate Regime ◽  
Exchange Rate Policy ◽  
International Exchange ◽  
Currency Exchange ◽  
Currency Exchange Rate ◽  
Rate Policy ◽  
The Government

This chapter studies how Norges Bank came to play a central, technical role in maintaining and defending a stable krone exchange rate during the years 1946–86. This role was reflected in how the bank advised on the basis of a loyal position to the fixed krone exchange rate regime and to binding international exchange rate cooperation. In 1978, Norway backed out of the European fixed exchange rate cooperation, and during 1976–86, the krone was devalued ten times. Even though Norges Bank officially came to contribute to both recommending and carrying out this policy, the policy defied the strong ideals and viewpoints of the organization. The exchange rate policy, and the problems it led to in relation to the central bank, caused the government, in the first half of the 1980s, to push Norges Bank completely aside when it came to the shaping of Norwegian exchange rate policy. Nevertheless, much of the policy was still shaped inside the walls of the institution.

scholarly journals The Effectiveness of Indicators of Financial Discipline in Strengthening the Exchange Rate, with a Special Reference to Iraq

2021 ◽  
Vol 27 (130) ◽  
pp. 118-141
Author(s):  
Karrar Mahdi Fenjan ◽  
Muhammad Saleh Salman
Keyword(s):  
Exchange Rate ◽  
Fiscal Policy ◽  
Central Bank ◽  
Foreign Currency ◽  
Public Expenditures ◽  
Public Budget ◽  
Negative Effects ◽  
The Public ◽  
The Exchange Rate ◽  
The Government

Controlling public expenditures is one of the main objectives of the public budget. The public budget often suffers from a deficit, whether in developed or developing countries, because expenditures are usually greater than the revenues generated. This requires the existence of financial rules that are adhered to by the government, which in turn leads to discipline. Fiscal policy leads to a reduction in the obligations incumbent on the government.  Adhering to the financial rules would correct the course of fiscal policy in Iraq, with the need to direct oil revenues in the years of financial abundance when global oil prices rise to sovereign funds similar to other rentier countries, which contributes to maintaining the stability of the exchange rate and reducing dependence on The Central Bank. It performs monetary sterilization operations to sterilize the negative effects resulting from the lack of fiscal policy discipline, which negatively affects the foreign currency reserves and depletes them. The main conclusion reached by the research is that there is a state of financial indiscipline that has negatively affected the Iraqi dinar exchange rate, and that the attempts of the Central Bank of Iraq have partially worked to reduce the negative effects of the expansionary financial policy, and the main recommendation of the research was to work to achieve more discipline in fiscal policy in order to reduce the state of economic instability and mitigate the monetary sterilization policy by The Central Bank and the accompanying depletion of hard currency

Sign in / Sign up

Export Citation Format

Share Document