The Developing Countries in a World of Flexible Exchange Rates

Abstract

The bias built into the politics of many countries against changes in parities of their exchange rates has meant that the degree of flexibility provided by the Bretton Woods system has not been fully used. Governments have thus deprived themselves of at least one instrument of policy in their attempts to reconcile internal and external objectives of policy. The result has been restrictions, protection and, in some cases, inhibitions of growth. These have had detrimental effects on the flow of trade and capital to the developing countries.