The closing of the US ‘gold window’ in August 1971 marked neither the end of the fixed exchange rate world nor the dawn of freely floating currencies. Rather conformity in international exchange rate practices ceased to be a generally acceptable goal. Each central bank now chooses its own exchange regime — freely floating, adjustable peg, controlled floating or fixed. Each system is promoted by salesmen who resort sometimes to simplification and exaggeration. ‘The conclusion is that good advice, whomever it comes from, depends on the shrewdness of the prince who seeks it’ (Machiavelli).
KeywordsExchange Rate Interest Rate Central Bank International Monetary Fund Foreign Exchange
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