Bundesbank's Pre-Euro Monetary Policy as an Example of the FlexIT Model

Inapplicability of the FlexIT Model to the UK and Spain's High-Inflation Era

The FlexIT Model as a Benchmark for Comparing Policy Regimes

Price Ratio Stability in FlexIT Regimes with Similar Inflation Targets

Comparison of FlexIT and FlexNIT Regimes

Long-Run Convergence in a FlexIT Economy

The Eurozone as a FlexIT Economy

Credibility as a Prerequisite for a Successful FlexIT Regime

UK's Shift to a FlexIT Regime as an Alternative Commitment Strategy

US FlexIT Regime and Inflation Target

Consider an economy where the central bank operates independently with a primary mandate to maintain a low and stable rate of price increases. The value of this country's currency is determined by supply and demand in global markets without direct government intervention. If this economy experiences a sudden, sharp decrease in consumer spending that pushes it towards a recession, what is the most likely combined response of the central bank and the exchange rate?

Analyzing a Country's Macroeconomic Framework

In an economy where the currency's value is determined by market forces and the central bank is independent with a strong mandate to maintain price stability, a sudden, large increase in the global price of imported raw materials will necessarily cause a sustained period of high inflation.

The Stabilizing Role of the Exchange Rate