Table Of ContentA FRAMEWORK FOR MONETARY STABILITY
FINANCIAL AND MONETARY POLICY STUDIES
Volume 27
The titles published in this series are listed at the end of this volume.
A FRAMEWORK FOR MONETARY
STABILITY
Papers and Proceedings of an International Conference organised
by De Nederlandsche Bank and the CentER for Economic
Research at Amsterdam
Edited by
J. ONNO DE BEAUFORT WIJNHOLDS
De Nederlandsche Bank, Amsterdam and University of Groningen,
The Netherlands
SYLVESTER C.W. EIJFFINGER
CentER for Economic Research and Tilburg University, The Netherlands
and
LEXH. HOOGDUIN
De Nederlandsche Bank, Amsterdam, The Netherlands
SPRINGER SCIENCE+BUSINESS MEDIA, B.V.
Library of Congress Cataloging-in-Publication Data
A framework for monetary stability : paper and proceedings of an international conference
organised by De Nederlandsche Bank and the CentER for Economic Research at Amsterdam,
The Netherlands, October 1993 / edited by J. Onno de Beaufort Wijnholds and Sylvester C.W.
Eijffinger and Lex H. Hoogduin.
p. cm. — (Financial and monetary policy studies ; 27)
ISBN 978-0-7923-3173-5 ISBN 978-94-011-0850-8 (eBook)
DOI 10.1007/978-94-011-0850-8
1. Monetary policy—Congresses. 2. Banks and banking, Central-
-Congresses. I. Beaufort Wijnholds, J. A. H. de. II. Eijffinger,
Sylvester C. W. III. Hoogduin, Lex H. IV. Nederlandsche Bank.
V. Center for Economic Research at Amsterdam. VI. Series.
HG230.3.F72 1994
332.4'6-dc20 93-45987
ISBN 978-0-7923-3173-5
Printed on acid-free paper
All rights reserved
© 1994 Springer Science+Business Media Dordrecht
Originally published by Kluwer Academic Publishers in 1994
Softcover reprint of the hardcover 1st edition 1994
No part of the material protected by this copyright notice may be reproduced or
utilized in any form or by any means, electronic or mechanical,
including photocopying, recording or by any information storage and
retrieval system, without written permission from
the copyright owner.
TABLE OF CONTENTS
Foreword ix
Introduction xi
Part A - Thursday October 21,1993
Wim F. Duisenberg
Opening Speech by the President of De Nederlandsche Bank 3
David Mullins Jr.
Keynote Speech by the Vice Chairman of the Federal Reserve Board: 5
A Framework for Monetary Stability - A Policy Maker's Perspective
Session I - The Final Objective of Monetary Policy
Charles Freedman
Formal Targets for Inflation Reduction: The Canadian Experience 17
Stanley Fischer
The Costs and Benefits of Disinflation 31
John Driffill
Comment on C. Freedman: Formal Targets for Inflation Reduction: 43
The Canadian Experience
Jose Luis Malo de Molina
Comment on S. Fischer: The Costs and Benefits of Disinflation 49
Session II - The Position of the Central Bank
Alex Cukierman
Commitment through Delegation, Political Influence and Central Bank 55
Independence
J. Onno de Beaufort Wijnholds and Lex Hoogduin
Central Bank Autonomy: Policy Issues 75
Eduard Bomhoff
Comment on A. Cukierman: Commitment through Delegation, 97
Political Influence and Central Bank Independe:nce
vi
Manfred J.M. Neumann
Comment on Onno de Beaufort Wijnholds and Lex Hoogduin: Central 103
Bank Autonomy: Policy Issues
Session III - The Design of Monetary Policy
Benjamin M. Friedman
Intermediate Targets versus Information Variables as Operating Guides 109
for Monetary Policy
Otmar Issing
Monetary Policy Strategy in the EMU 135
Alexandre Lamfalussy
Comment on B.M. Friedman: Intermediate Targets versus 149
Information Variables as Operating Guides for Monetary Policy
Paul de Grauwe
Comment on o. Issing: Monetary Policy Strategy in the EMU 153
Dinner Speech by Wim F. Duisenberg: To Cut or Not to Cut Interest 157
Rates: Some Remarks on the ERM
Part B - Friday October 22, 1993
Session IV - The Application of Monetary Policy
Andrew D. Crockett
Rules versus Discretion in Monetary Policy 165
Manuel Guitian
The Role of Monetary Policy in IMF Programs 185
Jacques J. Sijben
Comment on A.D. Crockett: Rules versus Discretion in Monetary Policy 211
Henk Jager
Comment on M. Guitian: The Role of Monetary Policy in IMF Programs 217
Session V - Monetary Policy and Exchange Rates
Marcello De Cecco and Francesco Giavazzi
Italy's Experience within and without the European Monetary System: 221
A Preliminary Appraisal
Andre Icard
Monetary Policy and Exchange Rates: The French Experience 239
Gunter D. Baer
Comment on M. De Cecco and F. Giavazzi: Italy's Experience within 257
and without the European Monetary System: A Preliminary Appraisal
Ralph C. Bryant
Comment on A. Icard: Monetary Policy and Exchange Rates: The 263
French Experience
vii
Session VI - Monetary Policy in Eastern Europe and Latin America
Richard Layard
Can Russia Control Inflation? 269
Rudiger Dornbusch
Stabilization and Monetary Reform in Latin America 283
Oleh Havrylyshyn
Comment on R. Layard: Can Russia Control Inflation? 299
Guillermo Ortiz
Comment on R. Dornbusch: Stabilization and Monetary Reform in 305
Latin America
Sylvester Eijffinger
A Framework for Monetary Stability - General Report 309
List of Participants 331
Foreword
Recently, De Nederlandsche Bank in coope:ration with the CentER for
Economic Research of Tilburg University organised an international conference
on monetary policy. This volume contains the papers, comments and speeches
given on that occasion. The organisation of such a conference and the
publication of this book were possible only through the efforts of a number of
people. More in particular I would like to thank the organising committee (prof
Onno de Beaufort Wijnholds, assoc prof Sylvester Eijffinger, dr Lex Hoogduin
and Broos van der Werff) , Hans Haan the conference manager, Imelda
Drubbel and Nicolette Ligtenberg who constituted the conference secretariat,
Bert Groothoff who acted as press officer and Eric Schaling for their assistance.
A special word of appreciation is due to mrs Bodil Andersen (Denmarks
National Bank) and mr Kumiharu Shigehara (Organisation of Economic
Cooperation and Development) who accepted the difficult task of chairing the
meetings which they did most admirably. Of course, a conference cannot even
take place without participants and cannot be a success without good
participants. I am very pleased that we could be the host of the eminent group
of people who in my view made the conference such a success. Before the
conference I thought it would be a one-time-event. After the event I am not so
sure.
Amsterdam Wim F. Duisenberg
November 1993 President of De Nederlandsche Bank
ix
Introduction
During October 20-23, 1993 an international conference took place at the
Grand Hotel in Amsterdam under the theme "A Framework for Monetary
Stability". This conference was organised by De Nederlandsche Bank and the
CentER for Economic Research of Tilburg University. The aim was to discuss
various aspects of monetary policy within a limited circle of high-ranking
central bankers and prominent monetary economists from universities and
research institutes from all over the world. In fact there were participants from
all continents. It was felt that an interaction between central bankers and
academics could be a fruitful exercise, not only in terms of an exchange of
views, but also because it might contribute to a convergence of thinking on
monetary policy.
In this volume the papers presented at the conference, the contributions of
the discussants, the speeches given and the general report in which the
conference was summarised are published. The outline of this book reflects the
programme of the conference. After a short opening speech by President
Duisenberg (De Nederlandsche Bank) clarifying the theme of monetary
stability, Vice Chairman David Mullins Jr. (Federal Reserve Board) delivered
the keynote speech in which he gave a policy maker's view of monetary
stability.
The conference was further organised in six sessions, three sessions on each
day. In each session two papers were presented by the authors. Subsequently,
comments were given by a discussant followed by a general discussion with the
participants of the conference. The subjects of the sessions were: the final
objective of monetary policy, the position of the central bank, the design of
monetary policy, the application of monetary policy, the consequences of
participating in exchange rate regimes for monetary policy, and monetary and
financial reform in Eastern Europe and Latin America. At the end of the first
day, President Duisenberg gave a dinner speech on recent developments within
and the future of the European exchange rate mechanism. Finally, the papers
and discussions were summarised and personal conclusions were drawn in a
general report by Sylvester Eijffinger (CentER and Tilburg University).
In our view, the material in this book covers a wide variety of issues presently
discussed with respect to monetary policy. It also makes clear where opinions
xi
xii
differ and on what grounds. Time will tell whether the conference promoted
the hoped-for convergence of views among the participants. However, it
certainly increased the degree of understanding of each others position. This
was clearly facilitated by the lively discussions that took place in the agreeable
environment in which the conference was held (the former council meeting hall
of the city of Amsterdam). A list of authors, discussants and other participants
is given at the end of this volume.
The editors wish to express their gratitude to all the contributors to this
volume. They have made it possible that this book can be published relatively
soon after the conference by submitting their papers in a timely fashion and by
their general willingness to revise them already at the venue of the conference.
The issues addressed are therefore still highly topical. We hope the readers will
benefit as much from reading the papers, comments and speeches as we
enjoyed organising the conference and editing this volume.
Amsterdamffilburg J. Onno de Beaufort Wijnholds
November 1993 Sylvester C.W. Eijffinger
Lex H. Hoogduin
