On floating exchange rates, currency depreciation and effective demand: a comment


  • Mario Sarcinelli




Currency, Exchange Rate


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


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How to Cite

Sarcinelli, M. (2012). On floating exchange rates, currency depreciation and effective demand: a comment. PSL Quarterly Review, 59(239). https://doi.org/10.13133/2037-3643/9875