The generation of operating surpluses by nonfinancial public enterprises is one technique by which domestic resources can be mobilized for use by the public sector (the enterprises themselves or some governmental unit). Assuming that the enterprises are operated in a manner consistent with X-efficiency and allocative efficiency, the pricing policies and practices that would be consistent with the generation of operating surpluses (or losses) are almost certainly regarded by many as a substitute in some sense for taxation (or subsidization) measures in the mobilization of domestic resources. 1 For example, Musgrave and Musgrave noted that, in the case of government monopolies, “if the government does not follow this [marginal cost pricing] rule but charges a higher price, this may be considered equivalent to imposing an excise tax on the product.” 2
This paper discusses the underlying objectives of the exchange rate regime are necessarily related to broader objectives of the international financial system and the international economy. The exchange rate regime should help to promote a satisfactory working of the adjustment process. The exchange rate regime should help to promote, or at least support, the pursuit of economic and financial policies that contribute to countries’ domestic objectives, as regards both real economic variables and financial variables, notably including the degree of price stability. Attainment of the underlying objectives for the exchange rate regime suggests a number of instrumental or operational desiderata, which are listed below without regard to potential conflict between them and therefore without consideration of any trade-off among themselves. A system of adjustable parities and narrow margins should score well on the objective of exchange stability, provided that the adjustments are not too large or too frequent.