International capital markets and central bank sovereignty

Article Abstract:

A shopping time model can be used to calculate the elasticity of demand in relation to income for domestic currency. This type of model is unable to generate a monetary services production function showing constant elasticity of substitution. A seigniorage maximization model can be used to examine the impact of an expansion of global financial markets on the rate of seigniorage maximizing inflation. Countries that remove barriers to international financial markets, and raise revenue using inflation seigniorage, have to reduce their inflation rates.

Exchange Rates, Prices

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International capital markets and central bank sovereignty

Article Abstract:

Jason Saving and Thomas Saving assume that deregulation of exchange controls leads to a drop in transactions costs, and that exchange rate liberalization has caused falls in inflation in a number of countries. Other factors could have led to this drop in inflation. Wider demand for liquidity has not been considered, and inflation, exchange rate and interest rate expectations are also absent from the Savings' model. These issues are relevant for the European Union as it moves toward European moentary union.

European Union, Western Europe, Monetary unions

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Central bank independence and the trade-off between inflation and output stabilisation

Article Abstract:

The relationship between independence for central banks and the balance between inflation and stability of output can be studied using a short-run Philips curve. Discretionary monetary policy can give rise to both an output stabilization bias and an inflation bias. Output stabilization is possible both when central banks have a high level of independence and when it is low. Greater independence for central banks tends to be linked to more emphasis on inflation than on stabilization of output.

Management

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