NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Exchange Rate Policy Reconsidered

Richard C. Marston

NBER Working Paper No. 2310 (Also Reprint No. r1122)
Issued in July 1987
NBER Program(s):International Trade and Investment Program, International Finance and Macroeconomics Program

The Bretton Woods Conference of 1944 which fixed exchange rates for over twenty-five years is often cited as a model of economic cooperation among countries. Yet over fifteen years have elapsed since the breakdown of the Bretton Woods System without any serious efforts to restore fixed exchange rates among the currencies of the major industrial countries. This paper considers why governments may have refrained from "reforming" the exchange rate system. The first section of the paper examines the principal problem which exchange rate policy is designed to address, exchange rate variability. The paper distinguishes between the short run volatility of exchange rates, which firms can hedge against in the financial markets, and longer term swings in real exchange rates, which can lead to costly resource reallocation. The paper reviews evidence concerning the effectiveness of exchange market intervention, evidence which suggests that intervention may not be effective unless it is monetized. The paper goes on to analyze arguments concerning fixed exchange rates, and to assess the experience of two fixed rate systems, Bretton Woods and the European Monetary System. Finally, the paper examines the target zone system which has been proposed as an alternative to freely floating and fixed exchange rates.

download in pdf format
   (963 K)

download in djvu format
   (616 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w2310

Published: International Economic Cooperation, edited by Martin Feldstein, Chicago: The University of Chicago Press, 1988.

Users who downloaded this paper also downloaded* these:
Marston w2905 Pricing to Market in Japanese Manufacturing
McKinnon, Ohno, and Shirono The Syndrome of the Ever-Higher Yen, 1971-1995: American Mercantile Pressure on Japanese Monetary Policy
Martinez-Bravo, PadrĂ³ I Miquel, Qian, and Yao w16948 Do Local Elections in Non-Democracies Increase Accountability? Evidence from Rural China
Reinhart and Reinhart w9670 Twin Fallacies About Exchange Rate Policy in Emerging Markets
Cespedes, Chang, and Velasco w7840 Balance Sheets and Exchange Rate Policy
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us