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Monetary Independence under Bretton Woods: Perspectives from a Stochastic, Maximizing Model

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  • Kit P. M. Pasula

Abstract

Research based on the Kouri-Porter (1974) model of international capital flows suggests that the central banks of nonreserve countries enjoyed considerable monetary independence during the Bretton Woods era. This paper is a theoretical and empirical reassessment of this conclusion. Using a stochastic, maximizing model, it is shown that the existence of imperfect asset substitutability does not guarantee monetary control. At the empirical level, the estimated offset coefficients for four industrialized countries are consistent with zero monetary independence.

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  • Kit P. M. Pasula, 1996. "Monetary Independence under Bretton Woods: Perspectives from a Stochastic, Maximizing Model," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 643-664, August.
    • Handle: RePEc:cje:issued:v:29:y:1996:i:3:p:643-64
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    Cited by:

    1. Pasula, Kit, 1997. "Monetary Non-Neutrality and the Intertemporal Approach to the Balance of Trade: The UK Trade Balance under Bretton Woods," Review of International Economics, Wiley Blackwell, vol. 5(3), pages 333-347, August.

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