What Do Currency Crises Tell Us About the Future of the International Monetary System?

Barry Eichengreen and Charles Wyplosz

No 233418, Center for International and Development Economics Research (CIDER) Working Papers from University of California-Berkeley, Department of Economics

Abstract: In this paper we review what is known about exchange rate crises. We then draw out lessons for the choice of exchange rate regime. We show the dilemmas of exchange rate management are particularly acute for small, open developing economies. Freely floating exchange rates are not tolerable for such countries because their markets are thin, their exchange rates would be volatile, and their trade and production would be severely disrupted. But fixed exchange rates are not viable either because they would be highly susceptible to destabilizing speculative attack. Larger neighbors, for whom international transactions are less important, will have little reason to contemplate stabilizing their exchange rates against one another. This scenario points to eventual emergence of a world organized around three currency zones centered on the United States, Western Europe and Japan.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 27
Date: 1995-10
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Citations: View citations in EconPapers (4)

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Working Paper: What Do Currency Crises Tell Us About the Future of the International Monetary System? (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ucbewp:233418

DOI: 10.22004/ag.econ.233418

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