Credibility in fixed exchange rate regimes: Theoretical and historical perspectives

Michael Bordo, Ronald Macdonald

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

At present, the global monetary regime is based on floating exchange rates among the major advanced countries: the United States, Japan, the United Kingdom, Canada, Australia, and the Eurozone. The Eurozone is a monetary union. The rest of the world has a gamut of regimes, ranging from floating to hard pegs. A key underlying factor behind the current regime is credibility to maintain stable monetary policies.

The origins of credibility in monetary regimes go back to the classical gold standard, 1880–1914. In that regime, in the advanced countries, adherence by the monetary authorities to the rule of convertibility of national currencies in terms of gold provided a credible nominal anchor. Today gold is no longer the nominal anchor; instead this anchor is based on the credibility of independent central banks dedicated to keeping inflation low. Between 1914 and the present, the world exhibited several regimes that gradually did away with gold as the nominal anchor and that had varying success in maintaining credibility. In this book, we present nine studies of how credibility functioned in four monetary regimes, from the gold standard to the present regime of managed floating.

Original languageEnglish (US)
Title of host publicationCredibility and the International Monetary Regime
Subtitle of host publicationA Historical Perspective
PublisherCambridge University Press
Pages3-14
Number of pages12
ISBN (Electronic)9781139045841
ISBN (Print)9780521811330
DOIs
StatePublished - Jan 1 2012

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Credibility
Fixed exchange rates
Exchange rate regimes
Historical perspective
Nominal anchor
Monetary regimes
Gold standard
Floating
Euro zone
Convertibility
Inflation
Japan
Monetary union
Central bank
Authority
Floating exchange rates
Currency
Adherence
Canada
Monetary policy

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)

Cite this

Bordo, M., & Macdonald, R. (2012). Credibility in fixed exchange rate regimes: Theoretical and historical perspectives. In Credibility and the International Monetary Regime: A Historical Perspective (pp. 3-14). Cambridge University Press. https://doi.org/10.1017/CBO9781139045841.002
Bordo, Michael ; Macdonald, Ronald. / Credibility in fixed exchange rate regimes : Theoretical and historical perspectives. Credibility and the International Monetary Regime: A Historical Perspective. Cambridge University Press, 2012. pp. 3-14
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Bordo, M & Macdonald, R 2012, Credibility in fixed exchange rate regimes: Theoretical and historical perspectives. in Credibility and the International Monetary Regime: A Historical Perspective. Cambridge University Press, pp. 3-14. https://doi.org/10.1017/CBO9781139045841.002

Credibility in fixed exchange rate regimes : Theoretical and historical perspectives. / Bordo, Michael; Macdonald, Ronald.

Credibility and the International Monetary Regime: A Historical Perspective. Cambridge University Press, 2012. p. 3-14.

Research output: Chapter in Book/Report/Conference proceedingChapter

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Bordo M, Macdonald R. Credibility in fixed exchange rate regimes: Theoretical and historical perspectives. In Credibility and the International Monetary Regime: A Historical Perspective. Cambridge University Press. 2012. p. 3-14 https://doi.org/10.1017/CBO9781139045841.002