Skip to main content
×
Home
    • Aa
    • Aa

The Effectiveness of Monetary Policy Anchors: Firm-Level Evidence

  • J. Lawrence Broz (a1) and Michael Plouffe (a2)
Abstract
Abstract

Analyses of monetary policy posit that exchange-rate pegs, inflation targets, and central bank independence can help anchor private-sector inflation expectations. Yet there are few direct tests of this argument. We offer cross-national, micro-level evidence on the effectiveness of monetary anchors in controlling private-sector inflation concerns. Using firm-level data from eighty-one countries (approximately 10,000 firms), we find evidence that “international” anchors (exchange-rate commitments) correlate significantly with a substantial reduction in private-sector concerns about inflation while “domestic” anchors (inflation targeting and central bank independence) do not. Our conjecture is that private-sector inflation expectations are more responsive to exchange-rate anchors because they are more transparent, more constraining, and more costly than domestic anchoring arrangements.

Copyright
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

International Organization
  • ISSN: 0020-8183
  • EISSN: 1531-5088
  • URL: /core/journals/international-organization
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Metrics

Full text views

Total number of HTML views: 5
Total number of PDF views: 88 *
Loading metrics...

Abstract views

Total abstract views: 166 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 23rd June 2017. This data will be updated every 24 hours.