European Dual Exchange Rates
In the early 1970s, many European countries faced a difficult predicament. Uniform fixed exchange rates allowed speculative capital movements to deliver large international reserve fluctuations, yet abandoning fixed exchange rates in favor of flexible rates could possibly deliver large exchange rate fluctuations that would disrupt trade. Between 1971 and 1974, several European countries, such as Belgium, France, and Italy, used a dual exchange market as a temporary middle-ground between the fixed and flexible rate extremes. Such an arrangement involved the formal establishment of separate exchange markets, with separate exchange rates, for current and capital account transactions.
KeywordsEurope Income Expense Argentina Poss
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