Controlled floating and the confused issue of money illusion

Authors

  • W. FELLNER

DOI:

https://doi.org/10.13133/2037-3643/11437

Keywords:

Money illusion, currency system, current-account, exchange-rate flexibility

Abstract

The article deal with the issue of money illusion - a lack of sufficient realisation that one’s income in the relevant sense depends on prices as well as on the nominal size of the income. It begins with a general appraisal of problems faced in a currency system of controlled floating. The author then turns to a detailed analysis of whether money illusion is responsible for any existing differences between the domestic side-effects of achieving current-account objectives under exchange-rate flexibility on the one hand, and achieving these objectives under fixed rates on the other. The author concludes with suggestions concerning the 1972 American balance-of-trade effects of the 1971 exchange-rate modifications.

 

JEL: E42, E31, F32

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Published

2013-12-30

How to Cite

FELLNER, W. (2013). Controlled floating and the confused issue of money illusion. PSL Quarterly Review, 26(106). https://doi.org/10.13133/2037-3643/11437

Issue

Vol. 26 No. 106 (1973)

Section

Editorial

License

 
 
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