Current Account Targets and Managed Floating
The dilemmas confronting policy-oriented economists are always difficult, especially when the policy deemed optimal is also judged politically infeasible. Such was the case in the 1960s: floating exchange rates were regarded as desirable but out of the question. Proposals for reform of the system therefore centred upon second-best approximations to flexible exchange rates, such as widened bands and crawling pegs, though the participants in the discussion were usually careful to acknowledge their commitment to flexible rates.
KeywordsExchange Rate Current Account Foreign Exchange Market Current Account Deficit Flexible Exchange Rate
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- 5.A careful statement of the proposition sketched in this section is contained in James M. Henderson, `Asymmetry in Quasi-Fixed Exchange-Rate Systems’, Journal of International Economics, 1975. The model, simple as it is, has no analytical solution. Henderson’s paper contains the results of simulations of the world economy with asymmetric adjustment rules, as well as formal development of the model.Google Scholar