Two Debates: Exchange-Rate Systems and Policy Co-ordination

Abstract

In this chapter we shall focus on two ‘debates’ in macroeconomic policy. The first, on the relative merits of fixed, pegged and floating exchange-rate systems, is of long standing. As we have noted earlier, there have been various exchange-rate systems, of which the most important have been the gold standard, the Bretton Woods pegged rate system, and floating exchange rates.¹ The era of the Bretton Woods system in particular generated much controversy over the costs and benefits of fixed and floating exchange rates, an issue that has not been, and perhaps never can be, resolved.