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Alternative monetary approaches and causal nexus breakdown in rate of interest and currency reserves in Italy, 1961-1990

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  • Giuseppe Conti
  • Luciano Fanti

Abstract

Following a renewed interest for the investigation of the monetary policy in the Italian experience, this paper focus on the role of the official reserves as a target of Bank of Italy for the period 1961-1990, motivated by a long lasting tradition (e.g. Hawtrey, Keynes, Kaldor) for which reserves were crucial for the central bank behaviour. This paper analyses, mostly by using the Granger causality test, if this "traditional" rule could have been working for Italy in recent periods as well, regardless of exchange rate regimes and the mainstream monetary theories. Main conclusions neatly support the existence of two sub-periods: a first one (before 1979) during which the "traditional" praxis occurs; and a second one (after 1979) when the "alternative" praxis seems to prevail. This would confirm the break in monetary targeting adopted by the Italian central bank at the end of the Seventies.

Suggested Citation

  • Giuseppe Conti & Luciano Fanti, 2020. "Alternative monetary approaches and causal nexus breakdown in rate of interest and currency reserves in Italy, 1961-1990," Discussion Papers 2020/264, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    • Handle: RePEc:pie:dsedps:2020/264
    Note: ISSN 2039-1854
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    File URL: https://www.ec.unipi.it/documents/Ricerca/papers/2020-264.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary policy; interest rate; reserve ratio; Bank of Italy; Granger test;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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