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Controversies on Exchange Rate Systems

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Current Issues in Monetary Economics

Part of the book series: Contributions to Economics ((CE))

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Abstract

The vigorous debate between proponents of a fixed exchange rate system and proponents of a flexible exchange rate system has not decreased over the past 30 years. New theoretical and empirical research and new reform proposals have continued to fuel the dispute which regime is the best for an individual country and which serves best the task of an international monetary system, which is to provide a stable environment for international trade and investment. The experience with fixed exchange rates under the Bretton Woods system, in which the adjustment process to external imbalances was too slow in many countries and in which the central banks were eventually unable and unwilling to defend the fixed rates, most economists in the late 1960s and the 1970s advocated flexible exchange rates. The decision to let the Bretton Woods system collapse and to implement a flexible exchange rate regime between major international currencies reflected the firm belief in the superiority of flexible exchange rates at the time. However, with the strong rise in the value of the U.S. dollar in the early 1980s and its subsequent decline, doubts arose about the advantages of flexible rates. As a result, the 1980s were characterized by a growing disenchantment with flexible exchange rates, which led to an increasing support for limitations on the flexibility of exchange rates.

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  1. Otto Beisheim Graduate School of Management, Burgplatz 2, D - 56179, Vallendar, Germany

    Michael Frenkel

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  1. University of Hagen, Feithstr. 140, D-58084, Hagen, Germany

    Helmut Wagner (Chair of Macroeconomics) (Chair of Macroeconomics)

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Frenkel, M. (1998). Controversies on Exchange Rate Systems. In: Wagner, H. (eds) Current Issues in Monetary Economics. Contributions to Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-642-99797-6_12

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  • DOI: https://doi.org/10.1007/978-3-642-99797-6_12

  • Publisher Name: Physica-Verlag HD

  • Print ISBN: 978-3-7908-1127-8

  • Online ISBN: 978-3-642-99797-6

  • eBook Packages: Springer Book Archive

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