TY  - JOUR
AU  - Obstfeld,Maurice
AU  - Rogoff,Kenneth
TI  - The Mirage of Fixed Exchange Rates
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5191
PY  - 1995
Y2  - July 1995
UR  - http://www.nber.org/papers/w5191
L1  - http://www.nber.org/papers/w5191.pdf
N1  - Author contact info:
Maurice Obstfeld
Department of Economics
University of California, Berkeley
530 Evans Hall #3880
Berkeley, CA 94720-3880
Tel: 510/643-9646
Fax: 510/642-6615
E-Mail: obstfeld@econ.berkeley.edu

Kenneth S. Rogoff
Thomas D Cabot Professor of Public Policy
Economics Department
Harvard University
Littauer Center 216
Cambridge, MA 02138-3001
Tel: 617-495-4022
Fax: 617/495-7730
E-Mail: krogoff@harvard.edu
AB  - This paper discusses the profound difficulties of maintaining fixed exchange rates in a world of expanding global capital markets. Contrary to popular wisdom, industrialized-country monetary authorities easily have the resources to defend exchange parities against virtually any private speculative attack.  But if their commitment to use those resources lacks credibility with markets, the costs to the broader economy of defending an exchange-rate peg can be very high.  The dynamic interplay between credibility and commitment is illustrated by the 1992 Swedish and British crises and the 1994-95 Mexican collapse.  We also discuss the small number of successful fixers.
ER  -