Chapter

CHAPTER 3 The Par Value System: An Overview

Author(s):
International Monetary Fund
Published Date:
February 1996
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Author(s)
Margaret G. de Vries

Since the par value system was initiated in 1945, there have been several ups and downs—or, more literally, downs and ups—in the extent to which it has been adhered to. In the first decade of the Fund’s life—that is until about 1955—several countries found it necessary to deviate from parity exchange rates. Some suspended their parities; others resorted to one or more of the myriad types of multiple exchange rate systems which made meaningless the par values to which they had originally agreed.

In the second decade of the Fund’s operations, however, a pronounced trend toward adherence to agreed par values appeared. Par values were agreed by most countries which had not previously had them; fluctuating exchange rates were abolished in favor of agreed parities; and many multiple rates were eliminated. In many countries where par values had not been established, exchange rates of a fixed nature were introduced.

This trend toward par values, or at least toward fixed exchange rates, became especially marked after 1960. By the end of 1965, some 57 of the Fund’s 103 members were using their par values for all transactions; another 4 had only minor deviations from the par value system; and 28, although without par values, were using fixed or stable single rates of exchange. In this sense, by the mid-1960’s the par value system was for the first time operating in the great majority of countries.

These broad trends are traced in this chapter, following a brief description of the genesis of the par value system and how it was meant to work. Focus on these general trends, however, is merely introductory to the main story of exchange rates in the twenty years reviewed here. Much occurred quietly and behind the scenes, as it were. As the Fund administered the par value system, a variety of policies on different aspects of exchange rates had to be formulated and implemented. Answers had to be provided, for example, to such questions as the circumstances in which par values should be instituted or when they might be delayed; and policies had to be worked out governing the adjustment of par values in instances of fundamental disequilibrium. In the same way, it was essential that policies on multiple rates and on fluctuating rates be developed.

These matters are covered in detail in the next four chapters. Chapter 4 elaborates the policies that the Fund evolved from 1945 to 1965 on the establishment and maintenance of the par value system. Chapter 5 is concerned with policies on exchange rate adjustment—that is, with the alteration of par values or, where no par values exist, with the changing of existing exchange rates—and also contains a statistical picture of the extent to which exchange rates were actually altered between the time the Fund was established and the end of 1965. Chapter 6 traces the policies of the Fund as regards multiple rates, and Chapter 7 as regards fluctuating rates.

GENESIS OF THE PAR VALUE SYSTEM

From very early in World War II, there had been extensive discussion about the nature of the exchange rate system which would be appropriate after the war. What was believed to be needed was some sort of international mechanism by which an individual country’s exchange rate could be set and altered under mutually agreed conditions. The interwar years seemed to have demonstrated two primary needs as regards exchange rates. First, exchange rates should be established and changed in the context of an international review, rather than by countries acting alone. Since countries had a vital interest in each other’s exchange rates, international cooperation was essential. It was unilateral action that had led to the economic chaos of the 1930’s. Second, stable exchange rates were regarded as more likely than fluctuating or frequently changing rates to produce good financial relations between countries and an orderly working of the international monetary system. Following the “beggar-my-neighbor” experiences of the 1930’s, exchange rates that were frequently changed were thought to run the risk of creating opportunities for competitive exchange depreciation and of exporting unemployment.

Some influential economists, then as now, believed in the merits of fluctuating exchange rates, at least in certain circumstances. In the forthcoming years much ingenuity was to be devoted to producing schemes for almost automatic fluctuations in exchange rates which, it was hoped, would not involve competitive exchange depreciation. Nonetheless, the par value system was generally accepted as a central core of the new international cooperation.

Procedures are set out in the Articles, first for establishing and then for maintaining an international par value system. The principal Article in this regard is Article IV, of which the contents, partly quoted and partly summarized (in brackets) follow:

  • Section 1. Expression of par values.—(a) The par value of the currency of each member shall be expressed in terms of gold as a common denominator or in terms of the United States dollar of the weight and fineness in effect on July 1, 1944.

  • (b) [All computations relating to members’ currencies necessary for carrying on Fund activities are to be based on par values.]

  • Sec. 2. [Gold purchases and sales are to be based on par values.]

  • Sec. 3. Foreign exchange dealings based on parity.—The maximum and the minimum rates for exchange transactions between the currencies of members taking place within their territories shall not differ from parity

    • (i) in the case of spot exchange transactions, by more than one percent; and

    • (ii) in the case of other exchange transactions, by a margin which exceeds the margin for spot exchange transactions by more than the Fund considers reasonable.

  • Sec 4. Obligations regarding exchange stability.—(a) Each member undertakes to collaborate with the Fund to promote exchange stability, to maintain orderly exchange arrangements with other members, and to avoid competitive exchange alterations.

  • (b) [Provisions for exchange of currencies based on par values.]

  • Sec. 5. Changes in par values.—(a) A member shall not propose a change in the par value of its currency except to correct a fundamental disequilibrium.

  • (b) A change in the par value of a member’s currency may be made only on the proposal of the member and only after consultation with the Fund.

  • (c) When a change is proposed, the Fund shall first take into account the changes, if any, which have already taken place in the initial par value of the member’s currency as determined under Article XX, Section 4. If the proposed change, together with all previous changes, whether increases or decreases,

    • (i) does not exceed ten percent of the initial par value, the Fund shall raise no objection;

    • (ii) does not exceed a further ten percent of the initial par value, the Fund may either concur or object, but shall declare its attitude within seventy-two hours if the member so requests;

    • (iii) is not within (i) or (ii) above, the Fund may either concur or object, but shall be entitled to a longer period in which to declare its attitude.

  • (d)…

  • (e) A member may change the par value of its currency without the concurrence of the Fund if the change does not affect the international transactions of members of the Fund.

  • (f) The Fund shall concur in a proposed change which is within the terms of (c) (ii) or (c) (iii) above if it is satisfied that the change is necessary to correct a fundamental disequilibrium. In particular, provided it is so satisfied, it shall not object to a proposed change because of the domestic social or political policies of the member proposing the change.

  • Sec. 6. Effect of unauthorized changes.—If a member changes the par value of its currency despite the objection of the Fund, in cases where the Fund is entitled to object, the member shall be ineligible to use the resources of the Fund unless the Fund otherwise determines; and if, after the expiration of a reasonable period, the difference between the member and the Fund continues, the matter shall be subject to the provisions of Article XV, Section 2 (b) [that is, the member may be expelled from Fund membership].

In addition, Article XX, Section 4, specifies the procedures for the determination of initial par values. This Article states in part (summarized portions in brackets):

  • Sec. 4. Initial determination of par values.—(a) When the Fund is of the opinion that it will shortly be in a position to begin exchange transactions, it shall so notify the members and shall request each member to communicate within thirty days the par value of its currency based on the rates of exchange prevailing on the sixtieth day before the entry into force of this Agreement. [Enemy-occupied members still in the midst of hostilities were to be given extra time.]

  • (b) [The par value so communicated, except for enemy-occupied countries, is to become the par value unless, within ninety days after the Fund’s request for communication of a par value, the member notifies the Fund that it regards that par value as unsatisfactory or the Fund notifies the member that the par value is likely to cause undue use of the Fund’s resources. If such notification is given either way, the Fund and the member are to agree on a par value within a period determined by the Fund.]

  • (c) When the par value of a member’s currency has been established under (b) above, either by the expiration of ninety days without notification, or by agreement after notification, the member shall be eligible to buy from the Fund the currencies of other members to the full extent permitted in this Agreement, provided that the Fund has begun exchange transactions.

  • (d) In the case of a member whose metropolitan territory has been occupied by the enemy, the provisions of (b) above shall apply [but, (i) the period of ninety days shall be extended to a date fixed by agreement between the Fund and the member; meanwhile, (ii) the member may have recourse to Fund resources, under conditions and in amounts prescribed by the Fund and, (iii) may, by agreement with the Fund, change its par value].

  • (e) [Provision for an enemy-occupied country to adopt a new monetary unit.]

  • (f) Changes in par values agreed with the Fund under this Section shall not be taken into account in determining whether a proposed change falls within (i), (ii), or (iii) of Article IV, Section 5 (c).

  • (g) [Provision for par values for separate currencies of nonmetropolitan territories.]

  • (h) The Fund shall begin exchange transactions at such date as it may determine after members having sixty-five percent of the total of the quotas set forth in Schedule A have become eligible … to purchase the currencies of other members [that is, after they have agreed initial par values with the Fund]….

The par value technique can be characterized as one of managed flexibility of exchange rates; it stands between permanently fixed exchange rates, such as would exist under the gold standard, and freely fluctuating rates. In recent years, economists have come to refer to it as the “adjustable peg” system, par values being thought of as pegs that can be changed under specified conditions.

Late in 1946, for reasons made clear in the next chapter, the Fund decided to go ahead with the establishment of initial par values for its 39 members. All but seven of these members set such par values in December 1946. However, several problems already existed in connection with the system established. Most of the exchange rates prevailing were those that had been operative during World War II; some had been in use even earlier. It was, of course, known—and the Fund’s studies of individual countries at the time also revealed—that on the basis of price, wage, and cost of living comparisons, the rates for many currencies were out of line with the U.S. dollar and a few other currencies. In addition, it was explicitly recognized that the initial par values for some countries might later be found to be incompatible with the maintenance of full employment in those countries. The possibility was also envisaged that the initial par values agreed might have an unduly contractionist effect, reducing the exports of several countries and adversely affecting the flow of world trade. In this regard the Fund noted that the continuation of price inflation in a number of countries threatened to impair their ability to compete in world trade. Inflationary fiscal and credit policies, warned the Fund, would undermine the parities just established.1

Nevertheless, the Fund believed it preferable to make a start with these exchange rates rather than to wait until a better set of initial par values could be agreed. Many parities were thus accepted which the Fund was fully cognizant could not long be held. Some of them were already used in conjunction with other effective rates. For example, among the countries for which par values were accepted, eleven had various forms of multiple exchange rate systems. Ten of these—Bolivia, Chile, Colombia, Costa Rica, Cuba, Ecuador, Honduras, Nicaragua, Paraguay, and Peru—were in Latin America; the eleventh was Iran. Venezuela joined the Fund in December 1946 but did not establish a par value until 1947; it too had multiple rates.

EARLY BREAKS WITH THE SYSTEM

Establishing and maintaining the par value regime just after World War II was not an easy task. The Fund was immediately confronted with three kinds of deviations from the system of agreed par values. First, because of concern with the uncertainties in their economies, a few countries delayed setting initial par values at all. This postponement involved large countries, such as Italy, as well as small ones. Second, because of the inconvertibility of European currencies, broken cross rates—an exchange rate between two currencies in a third market which differs from that derived from their par values—were to emerge in several markets throughout the world. The third deviation from the par value system occurred almost at once. France, Mexico, Peru, and Canada took measures between 1948 and 1950 which suspended all transactions at their par values. The last three introduced fluctuating rates; France set up a limited free market.

The French proposal, in January 1948, to change its par value was a significant one: France was the first nation under the new international regime to propose a change in its exchange rate. Instead of making the change unilaterally, as it would have done before the days of the Fund, it came to an international organization to ask its opinion and concurrence. Subsequent developments, however, led to disagreement between France and the Fund. In addition to the change in the par value, France proposed a concurrent free market. In the free market were to be sold half the export proceeds and all receipts from investments in U.S. dollars and Portuguese escudos, and these currencies were to be bought in this free market for certain transactions. While the Executive Directors were prepared to concur in a devaluation of the franc to a realistic rate which would be applicable to transactions in all currencies, they objected to the proposed free market for a few currencies.

In July 1948 the Mexican Government informed the Fund that, unless Mexico could obtain substantial financial support, its par value could not be held. When this assistance was not forthcoming, Mexico suspended its par value in favor of a fluctuating rate; this rate lasted until June 1949, when a new par value was established. In November 1949 Peru proposed to abandon its official parity for the sol and to permit the exchange rate to fluctuate freely until it found its natural and stable level. In September 1950 Canada introduced a fluctuating rate.

ATTITUDES TOWARD DEVALUATION IN THE LATE 1940’s

Another stumbling block for the Fund and the par value system in these early years was the discovery, shortly after the Fund commenced operations, that members were reluctant to devalue their currencies. At the time of Bretton Woods it had been the fear in some circles that countries would resort to frequent exchange rate changes in the postwar period. Indeed, one of the objectives of the Fund was to be the curbing of excessive devaluation. By 1948, however, it had become apparent that these fears were misplaced. Countries had in fact tended to lean in the opposite direction, maintaining exchange rates which should have been changed. Apart from a devaluation by Italy in 1947, and the devaluations of France, Mexico, and Peru just noted, only Colombia and French Somaliland had altered their par values by mid-1949.2

Many reasons explain the lack of shifts in exchange rates in these initial years. Prior to 1949 there was still considerable concern that supply and production facilities had not yet been sufficiently restored in Western Europe to make relative prices a key factor in world trade. Inability to produce enough exportable goods remained the principal limitation on exports, and devaluation would not reduce imports, which were already held in check by restrictions. Moreover, inflation in European countries, as well as in much of the rest of the world, had not yet been brought under control. Until these countries achieved a reasonable amount of internal stability, any improvement in their balances of payments brought about by devaluation would be quickly dissipated by price rises.

By the latter part of 1948 and early in 1949, production in Western Europe had recovered and a reasonable degree of internal financial stability had been attained. Debate among economists then arose as to the need for an adjustment of European currencies. In a world which seemed to be increasingly characterized by controlled economies and imperfect markets, some economists questioned the relevance of the price mechanism for restoring balance of payments equilibrium. Others believed that the world dollar shortage was due to deep-seated differences in productivity between the United States and Western Europe. These economists argued that, until these differences in productivity were reduced, the devaluation required to achieve equilibrium would cut real incomes and consumption to intolerable levels. There was also a widely held belief that the U.S. demand for imports was inelastic with respect to relative price changes for imports and domestic commodities. Hence it was argued that devaluation by European countries would not increase their dollar earnings sufficiently to make the devaluation successful.3 Many economists, including some on the Fund staff, focused attention on and debated all these arguments.

Eventually the pound sterling was devalued, on September 17, 1949, from £1 = $4.03 to £1 = $2.80, or by 30.5 per cent, and this set off a series of devaluations literally around the world. Some countries had been waiting for sterling devaluation in order to adjust their own exchange rates. Others recognized that they had no alternative but to follow sterling.

INSTITUTION OF PROCEDURES

One of the consequences of the week of devaluations in September 1949 was an important institutional one for the Fund, for it brought to light the need for quick-acting procedures for handling changes in par values. Many such changes would have to be effected over week-ends, while exchange markets were closed. Speedy consideration and decision by the Fund was crucial. The Fund therefore instituted rush procedures for dealing with cables coming in late on Friday afternoons, for the preparation on Friday night and Saturday morning of reports by the staff, and for their immediate distribution to the Executive Directors. It was established that the Board would meet to consider the request on Sunday or at the latest Monday morning, depending on the circumstances.

The effects of the 1949 exchange devaluations on trade, payments, and prices became the object of special study by the Fund staff.4 The data were intensively examined as well for the lessons that might be learned for economic analysis,5 and for the estimation of trade elasticities.6 Appraisal of the immediate impact of the devaluations on international trade and the world dollar shortage was, however, made difficult by the host of other factors which came into play in 1950. These included recovery of the U.S. economy, a rapid acceleration of imports by the United States, and large increases in world demand and prices for raw materials after the middle of 1950, in connection with the outbreak of hostilities in Korea.

By the mid-1950’s many of the debates among economists and government officials concerning the benefits of the 1949 exchange rate devaluations had subsided. It was generally agreed that these devaluations and the subsequent expansion in dollar earnings by the countries of Western Europe had helped to lay the basis for the restoration of convertibility of European currencies which was achieved in 1958. Indeed, the expansion of European exports was so successful that by the mid-1960’s the view had emerged in some circles that the 1949 devaluations had been too great.

FURTHER FRACTURES IN THE PAR VALUE REGIME

During the early 1950’s more departures from the par value system took place. True enough, the Fund had gained several new members, most of which agreed initial par values: Burma, Ceylon, Germany, Haiti, Japan, Jordan, Pakistan, and Sweden. However, by this time there were several countries—Canada, Lebanon, Peru, Syria, and Thailand—which, instead of adhering to par values or even to fixed exchange rates, had turned to fluctuating rates. Moreover, there was considerable speculation that other countries—including the United Kingdom—were seriously contemplating the use of fluctuating rates. The advantages and disadvantages of fixed versus fluctuating exchange rates were intensively discussed, not only in academic circles but by highly placed government officials. In part because a few countries already had fluctuating rates, and in part because from time to time there emerged exchange difficulties with other currencies, there was some advocacy not only of fluctuating exchange rates for a particular country, but even of a large number of fluctuating rates.7

The Fund continued to defend the par value system, and contended that in the circumstances of the early 1950’s it was essential that the cooperative endeavor represented by the Fund be extended and improved, rather than undermined; but it was evident that a universal system of fixed par values was far from being achieved. Problems arising from the world dollar shortage—bilateralism and currency inconvertibility—had led to the temporary use of a variety of practices in Western Europe which deviated from the concept that all transactions should take place at rates based on par values. These practices included separate free markets for tourist receipts or other invisibles or capital transactions, and arrangements to increase dollar export earnings, such as retention quotas, import entitlement schemes, or “transit dollar” arrangements. In addition, multiple exchange rates, which had been introduced in the 1930’s in a few Latin American countries to cope with depression-oriented situations, were increasingly being used to cope with the postwar problems of currency inconvertibility, severe inflation, and economic development. As a result, there had been a continued spread of multiple rates.

By the end of 1956—a decade after the initial par values had been established in 1946—the Fund had 60 members. Eleven of these (Afghanistan, Argentina, China, Greece, Indonesia, Israel, Italy, Korea, Thailand, Uruguay, and Viet-Nam) had not yet established initial par values. France, having given up its initial par value in January 1948, had not yet set a new one. Canada continued to rely on a fluctuating rate. Twelve countries (Brazil, Colombia, Costa Rica, Ecuador, Finland, Iceland, Iran, Jordan, Nicaragua, Syria, Venezuela, and Yugoslavia) had multiple rate systems of some significance. Five (Bolivia, Chile, Lebanon, Paraguay, and Peru) that had abolished their multiple rates did so in favor of fluctuating rather than fixed rates. Six others (Cuba, Denmark, Egypt, the Netherlands, Sweden, and Turkey) had various minor multiple currency practices for some current transactions (many more had such practices for capital transactions). This left only 24 members out of 60 conducting all their current transactions at exchange rates within 1 per cent of their par values. In other words, only these had what can be defined as “fully effective par values,” that is, par values agreed with the Fund and all transactions (except certain minor practices affecting only capital transactions) conducted at parity rates.8 The first decade of the Fund’s existence had proved to be a most difficult environment for the attainment of its exchange rate objectives.

ACCELERATED TRENDS TOWARD PAR VALUES, 1957–65

In the next decade the setback to the par value system was to be overcome. In the second half of the 1950’s countries began to return to fixed exchange rates and to agree with the Fund on par values for their currencies. Once par values were set, they were effectively maintained for long periods of time. These trends, apparent by 1960, became even stronger thereafter.

A series of events brought about the gradual re-establishment of effective parity exchange rates. First was a progressive elimination of the minor multiple currency practices and retention quotas that had been maintained earlier by Western European countries. By 1958 the Fund was able to report that, for the most part, Western European currencies were traded in official exchange markets at rates fluctuating within official limits, and that in view of the closeness of the free market rates to the official market quotations, the problem of broken cross rates in these currencies was no longer important. Thus the Annual Report for 1958 was able to state that

most Fund members maintain exchange systems in which for the most part transactions take place within the prescribed margins of their respective par values agreed with the Fund. The currencies of these members include all that are most used as means of payment in international trading and financial transactions.9

Second, the major countries which had not previously established par values did so. On March 31, 1960, Italy agreed a par value of 625 lire = $1. In March 1961 Greece declared a par value (30 drachmas = $1). In May 1962 Canada, after nearly twelve years with a fluctuating rate, established a new par value of 1 Canadian dollar = 92.5 U.S. cents.

Third, beginning in 1955–56 a series of exchange reforms led to the elimination of many multiple rate systems in the less developed countries. For some of these countries the setting of new par values took place immediately. For others, experimentation with different rates of exchange was to occur before a new parity was finally selected and established.

Fourth, during 1958–65 initial par values were set for many of the countries then joining the Fund—twenty in all.

By 1965 there had been attained a regime in which the majority of Fund members had par values. By December 31 of that year, 57 of the Fund’s 103 members (55 per cent) were carrying out all their transactions at “fully effective par values,” 10 viz., the United States and Canada; all 19 European members; Australia, New Zealand, Jamaica, and Trinidad and Tobago; 6 out of 12 members in the Far East; 12 out of 34 in Africa; 6 out of 13 in the Middle East; and 8 out of 19 in Latin America.11 Nine years earlier, as previously noted, only 24 members out of 60 (40 per cent) had been in such a position, and the proportion had been even lower (36 and 38 per cent) in 1954 and 1955.

Because of the addition over time of many new members, the trend from 1954 to 1965 toward par values may be more clearly seen by use of a constant sample. At the end of 1954, out of a total of 56 member countries, 36 were without “fully effective par values,” although 10 of these had only minor deviations from the Fund’s standard. Among these 36 members, 21 had, by December 31, 1965, attained “fully effective par values.” This included many countries which had previously had systems of multiple rates, fluctuating rates, or long-standing absence of par values: Canada, Costa Rica, Finland, Greece, Iceland, Iran, Israel, Italy, Jordan, Nicaragua, the Philippines, and Yugoslavia.

The trend toward adherence to fixed exchange rates was even more marked than that toward legally instituted par values. By December 1965, more than 86 per cent of Fund members (89 out of 103) had fixed exchange rates or rates which, while nominally fluctuating, had been stable for several years; the comparable figure for the end of 1954 was 59 per cent (33 out of 56 members).

Furthermore, members with “fully effective par values” accounted for by far the bulk of world exports. Even in 1954, the approximately one third of Fund members that continued to adhere fully and formally to the par value regime had accounted for 76 per cent of world (noncommunist) exports; by 1965, the share in world exports of countries with par values had risen to 91 per cent.

CRITICISM AND DEFENSE OF THE SYSTEM IN THE 1960’s

By one of the ironies of international economic life, the effective attainment of a par value system and of stable unitary exchange rates coincided with renewed attacks by several economists on the par value regime. Their complaint was that par values were too infrequently altered; “adjustable pegs” were rarely adjusted. As a result, exchange rate changes were no longer an important instrument of balance of payments policy.

In the mid-1960’s, a number of economists, especially in academic circles but also in some official and semiofficial groups, were once again recommending fluctuating exchange rates for the major currencies of the world. But other specific suggestions for enhancing the flexibility of exchange rates were also forthcoming. A proposal was advanced for widening the range of fluctuations permitted under the par value regime to something like 5–7 per cent either side of the par value rather than the 1 per cent required by the Fund’s Articles. The necessary width of the band under this “band proposal” was said to depend on whether the effects of exchange rate changes on trade or capital were stressed; doubling the range of fluctuation from the present 2 per cent to 4 per cent was thought to be possibly sufficient for capital. Several economists favored a “shiftable-parity” or “crawling peg” arrangement: automatic adjustments in par values could be made at intervals which might be annual or, conceivably, even quarterly.12

The system of par values was, of course, not without academic defenders. In addition, the official views of the Fund and also of practically all central banks continued to favor—strongly—fixed exchange rates. Accordingly, when the Group of Ten agreed in August 1964 to study proposals for the reform of the international monetary system, changes in the exchange rate system were explicitly ruled out.13

Reluctance to tamper with the par value system reflected at least in part the experience of the Fund and its members during the previous twenty years. The greater use by Fund members of fully effective par values, described in this chapter, could be attributed to a variety of factors. Decisive among these, as is made clear in the next chapters, were the unsatisfactory results encountered with alternative exchange rate systems.

But there were other arguments in favor of fixed exchange rates—that they put national monetary authorities under pressure to integrate their policies; that they have to be defended by anti-inflationary measures; that they eliminate the danger of competitive depreciation. In addition to these arguments in favor of fixed exchange rates, the Fund had yet another reason for preferring the par value system: in the Fund’s view an alternative exchange rate system would make the process of international collaboration far more difficult.

As the year 1965 drew to a close, the debates over exchange rates were continuing and becoming even more heated.

Annual Report, 1947, p. 27.

For statements on the devaluations of Italy, Colombia, and French Somaliland, see Annual Report, 1948, pp. 63–64, and 1949, pp. 57, 58.

The various economic and political arguments against devaluation at this time can be found in Raymond F. Mikesell, Foreign Exchange in the Postwar World, pp. 136–44.

See, for example, J. J. Polak, “Contribution of the September 1949 Devaluations to the Solution of Europe’s Dollar Problem,” Staff Papers, Vol. II (1951–52), pp. 1–32; and Barend A. de Vries, “Immediate Effects of Devaluation on Prices of Raw Materials,” ibid., Vol. I (1950–51), pp. 238–53.

See Sidney S. Alexander, “Devaluation versus Import Restriction as an Instrument for Improving Foreign Trade Balance,” Staff Papers, Vol. I (1950–51), pp. 379–96.

Barend A. de Vries, “Price Elasticities of Demand for Individual Commodities Imported into the United States,” Staff Papers, Vol. I (1950–51), pp. 397–419; Sidney S. Alexander, “Effects of Devaluation on a Trade Balance,” ibid., Vol. II (1951–52), pp. 263–78; and Ta-Chung Liu, “The Elasticity of U.S. Import Demand,” ibid., Vol. III (1953–54), pp. 416–41. For a listing of other statistical studies dealing with trade elasticities, see Hang Sheng Cheng, “Statistical Estimates of Elasticities and Propensities in International Trade,” ibid., Vol. VII (1959–60), pp. 107–58.

A summary of the arguments for and against fluctuating exchange rates, as presented at that time, can be found in Bank for International Settlements, Twenty-Second Annual Report (Basle, 1952), pp. 142–49.

This definition is used here for statistical purposes only; it does not represent the official definition of the Fund.

Annual Report, 1958, p. 20.

As defined above, p. 48.

Details concerning the gradual attainment of the par value system can be found in Margaret G. de Vries, “Fund Members’ Adherence to the Par Value Regime,” Staff Papers, Vol. XIII (1966), pp. 504–32.

The literature on these proposals is extensive. Summaries of the arguments of academic economists may be found in International Monetary Arrangements: The Problem of Choice, Fritz Machlup and Burton G. Malkiel, eds., pp. 94–100; and in William Fellner, “On Limited Exchange-rate Flexibility,” in Fellner, Machlup, Triffin, and others, Maintaining and Restoring Balance in International Payments, pp. 111–22. An illustration of official argumentation may be found in Federal Republic of Germany, Sachverstandigenrat zur Begutachtung der gesamtwirtschaftlichen Entwinklung, Jahresgutachten, 1964, par. 240.

Ministerial Statement of the Croup of Ten and Annex Prepared by the Deputies (Paris, August 1964), Ministerial Statement, par. 2.

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