Stability and Exchange Rate Systems in a Monetarist Model of the Balance of Payments

  • Stanley Fischer


The fixed versus floating exchange rates debate appears destined for as long a life as any of the standing controversies in economics. The standard arguments are outlined by Johnson (1969) and Kindleberger (1969). This paper focuses on the effects of the exchange rate system on economic stability. We construct a simple model in which real disturbances affect the level of output each period and nominal disturbances affect the demand for money, and examine the resultant variability of the rate of consumption and the price level in a single country and in a two-country world under regimes of fixed and of floating exchange rates.


Exchange Rate Monetary Policy Price Level Exchange Rate Regime Monetary Authority 


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Copyright information

© Graduate School of Business, University of Chicago 1977

Authors and Affiliations

  • Stanley Fischer

There are no affiliations available

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