Harry Johnson's "case for flexible exchange rates"—50 years later

Maurice Obstfeld

No WP20-12, Working Paper Series from Peterson Institute for International Economics

Abstract: Fifty years ago, Harry G. Johnson published "The Case for Flexible Exchange Rates, 1969," its title echoing Milton Friedman's classic essay of 1953. Though somewhat overlooked today, Johnson's reprise was an important element in the late 1960s debate over the future of the international monetary system. In this Working Paper, Obstfeld lays out the historical context in which Johnson’s "Case" was written and read and then examines Johnson’s main points and sees how they stand up to nearly five decades of experience with floating exchange rates since the end of the Bretton Woods system. He also reviews the most recent academic critiques of exchange rate flexibility and asks how fatal they are to Johnson’s basic argument. He concludes that the essential case for exchange rate flexibility still stands strong.

Keywords: Monetary policy; natural rate of interest; Phillips curve; current account; capital flows; policy spillbacks (search for similar items in EconPapers)
JEL-codes: E52 F32 F41 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-his, nep-hpe, nep-mac, nep-opm and nep-ore
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