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On the link between exchange-rate regimes, capital controls and monetary policy autonomy in small European countries, 1979-2000

Forssbaeck, Jens LU and Oxelheim, Lars LU (2006) In World Economy 29(3). p.341-368
Abstract
We investigate international monetary-policy transmission under different exchange-rate and capital-account regimes in eleven small, open economies during the 1980s and 1990s. We find no systematic link between ex-post monetary-policy autonomy and exchange-rate regimes. Capital controls appear to have provided a degree of temporal insulation from foreign monetary policy shocks, though not strict autonomy. The results are consistent both with short-term autonomy for small countries even under fixed exchange rates and an open capital account, and with long-term dependence under flexible exchange rates and an independent stability target. Results also indicate that euro-area market interest rates are significantly more responsive to the... (More)
We investigate international monetary-policy transmission under different exchange-rate and capital-account regimes in eleven small, open economies during the 1980s and 1990s. We find no systematic link between ex-post monetary-policy autonomy and exchange-rate regimes. Capital controls appear to have provided a degree of temporal insulation from foreign monetary policy shocks, though not strict autonomy. The results are consistent both with short-term autonomy for small countries even under fixed exchange rates and an open capital account, and with long-term dependence under flexible exchange rates and an independent stability target. Results also indicate that euro-area market interest rates are significantly more responsive to the development of the corresponding US rate than were the previous national rates. (Less)
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author
and
organization
publishing date
type
Contribution to journal
publication status
published
subject
in
World Economy
volume
29
issue
3
pages
341 - 368
publisher
Wiley-Blackwell
external identifiers
  • wos:000236147000006
  • scopus:33645971311
ISSN
1467-9701
DOI
10.1111/j.1467-9701.2006.00786.x
language
English
LU publication?
yes
id
5341ffe4-62a8-4809-9ee5-fc69068e0953 (old id 693479)
date added to LUP
2016-04-01 15:52:06
date last changed
2021-05-25 04:55:11
@article{5341ffe4-62a8-4809-9ee5-fc69068e0953,
  abstract     = {We investigate international monetary-policy transmission under different exchange-rate and capital-account regimes in eleven small, open economies during the 1980s and 1990s. We find no systematic link between ex-post monetary-policy autonomy and exchange-rate regimes. Capital controls appear to have provided a degree of temporal insulation from foreign monetary policy shocks, though not strict autonomy. The results are consistent both with short-term autonomy for small countries even under fixed exchange rates and an open capital account, and with long-term dependence under flexible exchange rates and an independent stability target. Results also indicate that euro-area market interest rates are significantly more responsive to the development of the corresponding US rate than were the previous national rates.},
  author       = {Forssbaeck, Jens and Oxelheim, Lars},
  issn         = {1467-9701},
  language     = {eng},
  number       = {3},
  pages        = {341--368},
  publisher    = {Wiley-Blackwell},
  series       = {World Economy},
  title        = {On the link between exchange-rate regimes, capital controls and monetary policy autonomy in small European countries, 1979-2000},
  url          = {http://dx.doi.org/10.1111/j.1467-9701.2006.00786.x},
  doi          = {10.1111/j.1467-9701.2006.00786.x},
  volume       = {29},
  year         = {2006},
}