01750cas a2200241 a 4500 AALejournalIMF008413 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451843682 1018-5941 BD-DhAAL BD-DhAAL Molho, Lazaros. The Italian Lira in the Narrow Erm Band : The Challenge of Credibility / Lazaros Molho. Washington, D.C. : International Monetary Fund, 1991. 1 online resource (38 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Under free capital mobility, a high-inflation country pursuing a nonaccommodating exchange rate policy will have higher real interest rates than its lower-inflation trading partners as long as that policy is not credible. If the policy gains credibility prior to inflation convergence, the sign of the real interest rate differential may be reversed. Developments in interest rate differentials and capital and reserve flows suggest that Italy's nonaccommodating exchange rate policy has become significantly more credible in 1989-90. As improved credibility further limits their monetary autonomy, the Italian authorities will have to rely more on fiscal and incomes policies to promote disinflation. Mode of access: Internet IMF Working Papers; Working Paper ; No. 1991/019 Full text available on IMF http://elibrary.imf.org/view/journals/001/1991/019/001.1991.issue-019-en.xml IMF e-Library