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- Title
Real exchange rate persistence and systematic monetary policy behaviour.
- Authors
Groen, Jan J.; Matsumoto, Akito
- Abstract
This article focuses on the relationship between real exchange rate persistence and cross-country differences in the way in which national central banks interact with their respective economies. The emphasis of the analysis is on the real exchange rate between Germany and the United Kingdom in the period 1979-98. During this period German systematic monetary policy behaviour was broadly stable. In the United Kingdom, on the other hand, the feedback mechanism of monetary policy underwent some significant changes. Under a credible fixed exchange rate regime the degree of real exchange rate persistence should in theory be low, as in this case domestic monetary policy is implicitly used to ensure purchasing power parity (PPP) holds.
- Subjects
GERMANY; FOREIGN exchange rates; MONETARY policy; FISCAL policy; PURCHASING power parity; REAL wages
- Publication
Bank of England Quarterly Bulletin, 2004, Vol 44, Issue 4, p455
- ISSN
0005-5166
- Publication type
Article