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The Case for Fixed Exchange Rate Regimes: What for and in What Form?

Author

Listed:
  • Adrien Faudot

    (CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes, CREG - Centre de recherche en économie de Grenoble - UGA - Université Grenoble Alpes)

  • Nikolay Nenovsky

    (LEFMI - Laboratoire d’Économie, Finance, Management et Innovation - UR UPJV 4286 - UPJV - Université de Picardie Jules Verne)

Abstract

This paper provides several arguments for fixed exchange rates. First, any firm doing business abroad needs a stable and orderly exchange rate system. This is why most international corporations have chosen the US dollar as their functional currency. Second, although fixed regimes have been accused of hindering monetary policy, the paper argues that floating regimes do not guarantee currency sovereignty. Whether floating or fixed exchange rates are operative, a balance of payments constraint continues to apply to economic policies. Third, although history is replete with examples of "bad" exchange rate fixing, which fosters disequilibria and crises, fixed rates can pave the way for greater international monetary coordination, which is impossible if so-called independent monetary policies lead to currency devaluations and beggar-thy-neighbour policy measures.

Suggested Citation

  • Adrien Faudot & Nikolay Nenovsky, 2022. "The Case for Fixed Exchange Rate Regimes: What for and in What Form?," Post-Print hal-03906949, HAL.
    • Handle: RePEc:hal:journl:hal-03906949
    DOI: 10.1007/978-3-031-11240-9_10
    as

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