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The Flexible Exchange Rate System: Experience and Alternatives

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  • Dornbusch, Rudiger
  • Frankel, Jeffrey

Abstract

The experience with exchange rates over the last fifteen years has in many ways differed from what was anticipated in 1973 when the major industrialised countries abandoned the effort to keep the values of their currencies fixed. There is a widespread feeling that exchange rates have turned out to be more volatile than they were expected to be, than they should be, and perhaps than they need be. Many practitioners believe that exchange rates are driven by psychological factors and other irrelevant market dynamics, rather than by economic fundamentals. Support has grown in the 1980s for some sort of government action to stabilise currencies, perhaps a reform of the world monetary system.
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Suggested Citation

  • Dornbusch, Rudiger & Frankel, Jeffrey, 1988. "The Flexible Exchange Rate System: Experience and Alternatives," Department of Economics, Working Paper Series qt5ct1w459, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    • Handle: RePEc:cdl:econwp:qt5ct1w459
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    Cited by:

    1. Helpman, Elhanan & Leiderman, Leonardo, 1991. "Exchange Rate Systems: New Perspectives," Foerder Institute for Economic Research Working Papers 275504, Tel-Aviv University > Foerder Institute for Economic Research.
    2. Shehu Usman Rano Aliyu, 2010. "Exchange rate volatility and export trade in Nigeria: an empirical investigation," Applied Financial Economics, Taylor & Francis Journals, vol. 20(13), pages 1071-1084.
    3. Jeffrey Frankel., 1995. "How Well Do Foreign Exchange Markets Function: Might a Tobin Tax Help?," Center for International and Development Economics Research (CIDER) Working Papers C95-058, University of California at Berkeley.
    4. Jerome L. Stein & Giovanna Paladino, 1999. "Exchange Rate Misalignments and Crises," CESifo Working Paper Series 205, CESifo.
    5. Jeffrey A. Frankel, 1988. "International nominal targeting: a proposal for policy coordination," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 32, pages 234-239.
    6. Stein, Jerome L. & Paladino, Giovanna, 1997. "Recent developments in international finance: A guide to research," Journal of Banking & Finance, Elsevier, vol. 21(11-12), pages 1685-1720, December.
    7. Éric Girardin & Velayoudom Marimoutou, 1997. "Les fondamentaux permettent-ils d'améliorer la prévision du taux de change franc-dollar ?," Revue Économique, Programme National Persée, vol. 48(3), pages 661-672.
    8. Dodig, Nina & Herr, Hansjörg, 2015. "Theories of finance and financial crisis: Lessons for the Great Recession," IPE Working Papers 48/2015, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    9. Martin J. Bailey & George S. Tavlas, 1991. "Exchange Rate Variability and Direct Investment," The ANNALS of the American Academy of Political and Social Science, , vol. 516(1), pages 106-116, July.
    10. Katarina Juselius, 2017. "A CVAR scenario for a standard monetary model using theory-consistent expectations," Discussion Papers 17-08, University of Copenhagen. Department of Economics.
    11. Sergio Da Silva, 2004. "International Finance, Levy Distributions, and the Econophysics of Exchange Rates," International Finance 0405018, University Library of Munich, Germany.
    12. Søren Johansen & Katarina Juselius & Roman Frydman & Michael Goldberg, 2007. "Testing Hypotheses in an I(2) Model with Applications to the Persistent Long Swings in the Dmk/$ Rate," Discussion Papers 07-34, University of Copenhagen. Department of Economics.
    13. Frydman, R. & Goldberg, M.D., 2003. "Imperfect Knowledge and Asset Price Dynamics: Modeling the Forecasting of Rational Agents, Dynamic Prospect Theory and Uncertainty Premia on Foreign Exchange," Working Papers 03-03, C.V. Starr Center for Applied Economics, New York University.
    14. Baldwin, Richard E. & Skudelny, Frauke & Taglioni, Daria, 2005. "Trade effects of the euro: evidence from sectoral data," Working Paper Series 446, European Central Bank.
    15. Peter C. Dawson, 2015. "The capital asset pricing model in economic perspective," Applied Economics, Taylor & Francis Journals, vol. 47(6), pages 569-598, February.
    16. Francis Bismans & Olivier Damette, 2012. "La taxe Tobin : une synthèse des travaux basés sur la théorie des jeux et l’économétrie," Working Papers of BETA 2012-09, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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