The Case for Flexible Exchange Rates in 1980

David Laidler

Chapter 7 in European Monetary Union, 1982, pp 152-167 from Palgrave Macmillan

Abstract: Abstract Flexible exchange rates have never commanded universal support among economists, but it is fair to say that they found more enthusiastic adherents during the 1950s and 1960s, when a (more or less) fixed-exchange-rate regime was in force, than they do now, after close to a decade of experience with them. In this chapter, I seek to contribute to the ongoing debate about flexible exchange rates in a number of ways. First, I shall review briefly the by now well-known arguments about fixed and flexible exchange rates that monetary economics in and of itself permits us to develop. Second, I shall consider what may loosely be termed the political arguments about ‘discipline’, or lack thereof, in the conduct of policy that alternative exchange-rate regimes are said to promote, in the light of the experience of the 1970s. I shall pay particular attention here to British experience. Finally, I shall consider the issues raised in the first two substantive sections of this paper from a more general perspective, and will argue that there still remains a powerful case to be made for flexible exchange rates as a means of organising international monetary relations. The case however is essentially political rather than economic.

Keywords: Exchange Rate; Monetary Policy; Inflation Rate; Phillips Curve; European Monetary (search for similar items in EconPapers)
Date: 1982
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DOI: 10.1007/978-1-349-16781-4_10

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