On floating exchange rates, currency depreciation and effective demand: a comment
DOI:
https://doi.org/10.13133/2037-3643/9875Keywords:
Currency, Exchange RateAbstract
I certainly agree with the authors on the main point, which is that flexible exchange rates do not result in an automatic adjustment that brings equilibrium with full employment. What I would argue is that flexible exchange rates, however, may be more advantageous than those fixed and that the management of the exchange rate to achieve domestic policy objectives, although useful in some circumstances, it should become the norm in a world in which financial events affect frequently on real variables. In my view, the intervention on the foreign exchange market by the central bank should have a low frequency and used as a signal to prevent upward or downward trend, which of course requires the cooperation and support from other banks central. With regard to the measures compatible with the market on the movement of capital, the use of them should be even more cautious. However, a management for (rare) exception of the exchange rate is certainly possible.
JEL Codes: E24, F33
References
CALVO G.A. and F.S, MISHKIN (2003), "The mirage of exchange rate regimes for emerging market countries", Journal of Economic Perspectives, vol. 17, no. 4, pp. 99-118.
EDWARDS S. and E. LEVY YEYATI (2003), "Flexible exchange rates as shock absorbers", NBER Working Papers Series, no. 9867.
EICHENGREEN B. and R. HAUSMANN (1999), "Exchange rates and financial fragility", NBER Working Papers Series, no. 7418.
KAMIN S.B. and M. KLAU (1997), "Some multi-country evidence on the effects of real exchange rates on output", BIS Working Paper Series, no. 48.
LÒPEZ J. and I. PERROTINI (2006), "On floating exchange rates, currency depreciation, and effective demand", Banca Nazionale del Lavoro Quarterly Review, vol. LIX, no. 238, pp. 221-42.
MEADE J. (1951), The Theory of International Economic Policy, vol. I: The Balance of Payments, issued under the auspices of the Royal Institute of International Affairs, Oxford University Press, Oxford.
PALLEY T.I. (2003), "The economics of exchange rates and the dollarization debate: the case against extremes", International Journal of Political Economy, vol. 33, no. 1, pp. 61-82.
Downloads
Published
How to Cite
Issue
Section
License
