The advantages of fixed exchange rate regimes in combating inflation: a empirical and pratical analyst
Year: 2025
Type: article
Abstract: Fixed exchange rate regimes have historically been instrumental in the monetary policy toolkit of various countries, particularly those grappling with persistent inflation. This paper offers a detailed examination of the theoretical foundations, empirical data, formal models, and policy implications that underscore the advantages of implementing a fixed exchange rate for inflation control, using contemporary quantitative analyses, juxtapose different exchange rate regimes, and conduct a critical assessment of the credibility, discipline, and transmission mechanisms that contribute to the relative effectiveness of fixed exchange rates. The findings suggest that a fixed exchange rate can enhance monetary stability and provide a credible commitment to maintaining low inflation, which is crucial for fostering economic growth. Moreover, the discipline imposed by a fixed exchange rate can limit the tendency of governments to engage in inflationary financing, thereby reinforcing a stable economic environment. Through this comprehensive with a large empirical approach, the paper elucidates how fixed exchange rates not only serve as a mechanism for stabilizing prices but also contribute to broader economic health especially in devolping economics
Author: Rodrigo Bochner
Language: English
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4413922255