Harry Johnson’s “Case for Flexible Exchange Rates†– 50 Years Later

Maurice Obstfeld

No 14488, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Fifty years ago, Harry G. Johnson published “The Case for Flexible Exchange Rates, 1969,†its title echoing Milton Friedman’s earlier classic essay of the early 1950s. Though somewhat forgotten today, Johnson’s reprise was an important element in the late 1960s debate over the future of the international monetary system. The present paper has three objectives. The first is to lay out the historical context in which Johnson’s “Case†was written and read. The second is to examine Johnson’s main points and see how they stand up to nearly five decades of experience with floating exchange rates since the end of the Bretton Woods system. The third is to review the most recent academic critiques of exchange-rate flexibility and ask how fatal they are to Johnson’s basic argument. I conclude that the essential case for exchange rate flexibility still stands strong.

Keywords: Exchange rate regimes; Floating exchange rates; International monetary system; Effective lower bound; Global value chains; Global financial cycle; Dominant currency pricing (search for similar items in EconPapers)
JEL-codes: F31 F33 F41 F42 N20 N24 (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-his, nep-hpe, nep-mon, nep-opm and nep-ore
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