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Exchange Rate Misalignments and Adjustments: Implications for Floating and Fixed Parity Systems

Simon Parker ()

The Manchester School of Economic & Social Studies, 1998, vol. 66, issue 1, 44-58

Abstract: The author presents a framework for discriminating between fixed and floating exchange rate systems and illustrates it with U.K. data over 1975-90. It is found that a fixed parity system would have been unambiguously preferred to a floating system over this period unless the parity were set sufficiently noncentrally or costs from persistent currency overvaluation were sufficiently high. Under no circumstances could a floating parity have been unambiguously preferred to a fixed parity system. Copyright 1998 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1998
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Handle: RePEc:bla:manch2:v:66:y:1998:i:1:p:44-58