Abstract
There have been enormous medium-term deviations of real effective exchange rates of the main floating currencies from their fundamental equilibrium range. The dollar has been overshooting this equilibrium range to an extraordinary extent. It may now be on the way of undershooting. Such exaggerated exchange rate movements disturb optimal investment decisions and create great uncertainty with respect to international markets, which can lead to protectionism.1
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References
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If sterilized, interventions will at most have a temporary effect. See e.g. Report of the Working Group on Exchange Market Intervention (the Jurgensen Report), Washington DC and Paris, January 1983.
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For a more detailed description, see: e.g. De Nederlandsche Bank NV, Annual Report 1976.
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ERM = Exchange Rate Mechanism of the European Monetary System.
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© 1988 Kluwer Academic Publishers, Dordrecht
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Duisenberg, W.F. (1988). Exchange rate policy in a European and global perspective. In: Eizenga, W., Limburg, E.F., Polak, J.J. (eds) The Quest for National and Global Economic Stability. Financial and Monetary Policy Studies, vol 16. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-1389-9_2
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DOI: https://doi.org/10.1007/978-94-009-1389-9_2
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