On the use, misuse and abuse of the concept of the pivot

Abstract

In the recent literature on the appropriate structure for an international monetary system characterised by either adjustable-peg or gliding-peg exchange rates, a great deal of attention has been placed on the concept of the pivot. the present work seeks to place this literature in proper perspective, critically reexamining the propositions that have been advanced about the pivot and identifying thew weaknesses and strengths inherent in each. The various statements on the subject are first restated as formal theorems, and the arguments used to justify them are outlined. The policy implications implicit in such theorems are then developed. A critical evaluation of the basic theorems and their associated policy implications is then presented. Finally, some unresolved questions regarding the pivot are indicated.

JEL: E42