Abstract
The behaviour of floating exchange rates over the past 15 years has surprised and dismayed the proponents of flexibility. Nominal exchange rates have displayed a strikingly high degree of variability. The rise in nominal exchange-rate variability has been accompanied by a rise in real exchange-rate variability. Many observers believe that the connection is causal: that nominal exchange-rate movements have been a source of costly swings in relative prices. Exchange-rate flexibility does not seem to have provided the insulation from foreign disturbances or the autonomy for domestic policy predicted by early models. The implication is that exchange-rate flexibility may have larger costs and smaller benefits than forecast in 1973.
This research is supported in part by grants from the National Science Foundation, German Marshall Fund, and Institute of Business and Economic Research of the University of California at Berkeley. Carolyn Werley provided superb research assistance.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsPreview
Unable to display preview. Download preview PDF.
References
Aliber, Robert (1973) ‘The Interest Rate Parity Theorem: A Reinterpretation’, Journal of Political Economy, vol. 81, pp. 1451–9.
Artis, M. J. (1987) ‘The European Monetary System: An Evaluation’,Journal of Policy Modeling, vol. 9, pp. 175–98.
Beyen, J. W. (1949) Money in a Maelstrom (London: Macmillan).
Brown, William Adams (1940) The International Gold Standard Reinterpreted, 1914–1934 (New York: National Bureau of Economic Research).
Clarke, S. V. O. (1977) ‘Exchange-Rate Stabilization in the mid-1930s: Negotiating the Tripartite Agreement’, Princeton Studies in International Finance, no 41 (Princeton: Princeton University Press).
Diaz-Alejandro, Carlos (1983) ‘Stories of the 1930s for the 1980s’, in Pedro Aspe Armella, Rudiger Dornbusch and Maurice Obstfeld (eds) Financial Policies and the World Capital Market (Chicago: University of Chicago Press).
Eichengreen, Barry (1985) ‘International Policy Coordination in Historical Perspective: A View from the Interwar Years’, in Willem Buiter and Richard Marston (eds) International Economic Policy Coordination (Cambridge: Cambridge University Press) pp. 139–78.
Eichengreen, Barry (1988) ‘Real Exchange Rate Behavior under Alternative International Monetary Regimes: Inter-war Evidence’, European Economic Review, vol. 32, pp. 363–71.
Eichengreen, Barry (1989) ‘International Monetary Instability Between the Wars: Structural Flaws or Misguided Policies?’, prepared for the Fourth International Conference of the Institute for Monetary and Economic Studies of the Bank of Japan, 30 May-1 June.
Eichengreen, Barry and Portes, Richard (1986) ‘Debt and Default in the 1930s: Causes and Consequences’, European Economic Review, vol. 30, pp. 599–640.
Einzig, Paul (1937) The Theory of Forward Exchange (London: Macmillan).
Frankel, Jeffrey A. and MacArthur, Alan T. (1988) ‘Political vs. Currency Premia in International Real Interest Rate Differentials: A Study of Forward Rates for 24 Countries’, European Economic Review, vol. 32, pp. 1083–1114.
Friedman, Milton (1953) ‘The Case for Flexible Exchange Rates’, in Essays in Positive Economics (Chicago: University of Chicago Press).
Giavazzi, Francesco and Giovannini, Alberto (1988) ‘Can the European Monetary System Be Copied Outside Europe? Lessons from Ten Years of Monetary Policy Coordination in Europe’, NBER Working Paper no 2786 (December).
Giovannini, Alberto (1989) ‘How Fixed Exchange Rate Regimes Work: Evidence from the Gold Standard, Bretton Woods and the EMS’, in Marcus Miller, Barry Eichengreen and Richard Portes (eds) Blueprints for Exchange Rate Management (New York: Academic Press).
Hall, N. F. (1935) The Exchange Equalisation Account (London: Macmillan).
Hodrick, Robert (1987) The Empirical Evidence on the Efficiency of Forward and Futures Foreign Exchange Markets (Chur, Switzerland: Harwood Academic Publishers).
Howson, Susan (1980) ‘Sterling’s Managed Float: The Operation of the Exchange Equalisation Account’, Princeton Studies in International Finance, no 46 (Princeton: Princeton University Press).
Kindleberger, Charles (1973) The World in Depression, 1929–1939 (Berkeley: University of California Press).
League of Nations (various issues) Monthly Statistical Bulletin (Geneva: League of Nations).
Lewis, W. A. (1949) Economic Survey, 1919–1939 (London: Allen & Unwin).
McKinnon, Ronald (1987) ‘Monetary and Exchange Rate Policies for International Financial Stability: A Proposal’, unpublished manuscript, Stanford University.
Nurkse, Ragnar (1944) International Currency Experience (Geneva: League of Nations).
Shepherd, Henry L. (1936) The Monetary Experience of Belgium, 1914–1936 (Princeton: Princeton University Press).
Stockman, Alan (1988) Exchange Rate Volatility Under Alternative Exchange Rate Regimes: An Equilibrium Model’, Journal of Monetary Economics (forthcoming).
United Nations (1949) International Capital Movements During the Inter-War Period (Lake Success, New York: United Nations).
Author information
Authors and Affiliations
Editor information
Copyright information
© 1991 International Economic Association
About this chapter
Cite this chapter
Eichengreen, B. (1991). The Comparative Performance of Fixed and Flexible Exchange-Rate Regimes. In: Thygesen, N., Velupillai, K., Zambelli, S. (eds) Business Cycles. International Economic Association. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-11570-9_10
Download citation
DOI: https://doi.org/10.1007/978-1-349-11570-9_10
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-11572-3
Online ISBN: 978-1-349-11570-9
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)