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The Flexible Exchange Rate System: Experience and Alternatives

In: International Finance and Trade in a Polycentric World

Author

Listed:
  • Rudiger Dornbusch

    (Massachusetts Institute Of Technology)

  • Jeffrey Frankel

    (University Of California)

Abstract

The experience with exchange rates over the last fifteen years has in many ways differed from what was anticipated in 1973 when the major industrialised countries abandoned the effort to keep the values of their currencies fixed. There is a widespread feeling that exchange rates have turned out to be more volatile than they were expected to be, than they should be, and perhaps than they need be. Many practitioners believe that exchange rates are driven by psychological factors and other irrelevant market dynamics, rather than by economic fundamentals. Support has grown in the 1980s for some sort of government action to stabilise currencies, perhaps a reform of the world monetary system.

Suggested Citation

  • Rudiger Dornbusch & Jeffrey Frankel, 1988. "The Flexible Exchange Rate System: Experience and Alternatives," International Economic Association Series, in: Silvio Borner (ed.), International Finance and Trade in a Polycentric World, chapter 7, pages 151-208, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-349-09745-6_7
    DOI: 10.1007/978-1-349-09745-6_7
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