Exchange Rate Regimes: Some Lessons from Postwar Europe

Charles Wyplosz

No 2723, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Can Europe's post-war experience with fixed exchange rates be useful for today's emerging market countries? A new conventional wisdom suggests that the answer is negative, that in today's world of huge capital flows the only choice is between freely floating exchange rates and hard pegs. The Paper argues to the contrary, that Europe's strategy has much to recommend it. Most European countries have identified trade integration as a key objective, and considered that exchange rate stability was a prerequisite for establishing a level-playing field. The survival of the regime was made possible by widespread financial repression. There is no evidence that such a strategy stunted growth, quite the contrary in fact. Nor is it the case that this strategy is impossible today for other small open economies.

Keywords: Liberalization; Sequencing; Exchange rate regimes; Currency crises (search for similar items in EconPapers)
JEL-codes: E30 F30 F40 G20 O10 (search for similar items in EconPapers)
Date: 2001-03
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Citations: View citations in EconPapers (8)

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