Abstract

The current exchange rate system came about as a result of the collapse of the Bretton Woods system of fixed but adjustable exchange rates.6 Under the Bretton Woods system, countries generally pegged their exchange rates within narrow margins (plus or minus 1 percent) against the U.S. dollar, while the value of the U.S. dollar was fixed in terms of gold. Exchange rates were maintained near their pegs by using official reserve assets in exchange market intervention and by influencing private capital flows through both changes in domestic policies and outright controls on capital movements. Changes in the pegs were subject to international surveillance by the IMF and permitted only under conditions of “fundamental disequilibrium.” This system, which was initiated at the Bretton Woods conference in 1944, served the world quite well through the early 1960s, as it provided agreed rules of conduct that were widely shared and thereby imparted a stability to the postwar trading system that was notably absent in the 1930s. However, the underlying tensions in the system became evident during the late 1960s. This tension reflected a number of factors, including the expansionary nature of U.S. macroeconomic policy, the increase in the resources available to private capital markets in relation to official reserve holdings, and divergences in policy objectives among some of the major participants in the system.7 Despite attempts to maintain the system in the early 1970s, agreed parities between the currencies of the major industrial countries were finally abandoned in early 1973.

The current exchange rate system came about as a result of the collapse of the Bretton Woods system of fixed but adjustable exchange rates.6 Under the Bretton Woods system, countries generally pegged their exchange rates within narrow margins (plus or minus 1 percent) against the U.S. dollar, while the value of the U.S. dollar was fixed in terms of gold. Exchange rates were maintained near their pegs by using official reserve assets in exchange market intervention and by influencing private capital flows through both changes in domestic policies and outright controls on capital movements. Changes in the pegs were subject to international surveillance by the IMF and permitted only under conditions of “fundamental disequilibrium.” This system, which was initiated at the Bretton Woods conference in 1944, served the world quite well through the early 1960s, as it provided agreed rules of conduct that were widely shared and thereby imparted a stability to the postwar trading system that was notably absent in the 1930s. However, the underlying tensions in the system became evident during the late 1960s. This tension reflected a number of factors, including the expansionary nature of U.S. macroeconomic policy, the increase in the resources available to private capital markets in relation to official reserve holdings, and divergences in policy objectives among some of the major participants in the system.7 Despite attempts to maintain the system in the early 1970s, agreed parities between the currencies of the major industrial countries were finally abandoned in early 1973.

Characteristics of the Current Exchange Rate Regime

The Bretton Woods system was replaced by an exchange rate system of managed floating, especially between the three major currencies, which has continued to the present. One characteristic of the current system is that countries are free to choose their own bilateral exchange rate relationships. This was codified in the Second Amendment to the Articles of Agreement of the IMF, as stated in Section 2(b) of Article IV:

  • Under an international monetary system of the kind prevailing on January 1, 1976, exchange arrangements may include (i) the maintenance by a member of a value for its currency in terms of the special drawing right or another denominator, other than gold, selected by the member, or (ii) cooperative arrangements by which members maintain the value of their currencies in relation to the value of the currency or currencies of other members, or (iii) other exchange arrangements of a member’s choice.

The choice of exchange rate regime reflects to a considerable extent individual countries’ assessments of the benefits and costs of a fixed or flexible exchange rate.8 The benefits that can stem from a fixed but adjustable exchange rate regime typically include enhanced trading and investing opportunities with the other countries within the arrangement, owing to reduced uncertainty, and the stability that a nominal anchor in the form of a pegged rate can provide for monetary policy and inflation expectations. The main cost of such an arrangement is the loss of flexibility in orienting policies toward achieving domestic rather than exchange rate objectives. While these costs may be relatively small if the country in question experiences underlying disturbances similar to those in countries against which it is fixing its exchange rate, they are likely to increase substantially in the face of shocks that impinge only on its economy, although such disturbances can be dealt with by changes in the parity. These considerations, which predict that fixed exchange rates are more likely to develop in regions of the world with close economic ties and similar disturbances, form the basis of the literature on optimum currency areas.9 As countries face different economic circumstances, the result is a mixed international monetary system in which some countries allow their exchange rates to float relatively freely while others fix the value of their currency against another currency or basket of currencies.

The defining characteristic of the present system, however, is the existence of floating exchange rates between the world’s three most important currencies. While the external values of their currencies are not a matter of indifference to these countries, as shown by the Plaza Agreement of 1985 and the Louvre Accord of 1987, significant fluctuations in the relative values of the dollar, yen, and deutsche mark have occurred throughout the floating exchange rate period. Clearly, the three largest industrial countries have not felt a strong need to stabilize their bilateral exchange rates.10 In particular, they make no consistent or determined effort to manipulate domestic economic policies with the intent of constraining exchange rates within relatively narrow limits.

Several smaller industrial countries also have floating exchange rates, most notably Australia, Canada, New Zealand, and Switzerland. In the aftermath of the European exchange rate crises of 1992–93, Finland, Italy, Norway, Sweden, and the United Kingdom have also adopted this arrangement. This decision does not imply that the level of the exchange rate is unimportant for these countries. In Canada, for example, the level of the exchange rate is clearly perceived as a key macroeconomic variable. Official intervention is used to moderate exchange rate movements (“leaning against the wind”), and the authorities take into account exchange rate movements in formulating and implementing monetary policy. However, while the behavior of the exchange rate may at times affect decisions regarding domestic policies, economic policy is not explicitly geared toward maintaining a particular value or range of values for the currency. The same approach generally applies to other countries with floating exchange rates.

The most important regional arrangement for limiting exchange rate fluctuations is the ERM. When instituted in 1979, the ERM was seen largely as a method of reducing the volatility in exchange rates between European currencies following the breakdown of the Bretton Woods fixed exchange rate system. In the early 1980s, however, the focus switched to controlling inflation, with realignments becoming less frequent and smaller than the persistence of underlying inflation differentials would have warranted.11 Most recently, the ERM has been seen as an essential part of the movement toward economic integration of the EU. Membership in the ERM is one of the explicit conditions for entry into the European Monetary Union written into the Treaty on European Union, which was signed in February 1992.

Until the period of sustained market pressures starting in September 1992, the ERM had worked well in successfully reducing exchange rate volatility between members, providing a useful nominal anchor for high-inflation countries, and encouraging economic integration. In particular, between early 1987 and early 1992, the ERM became both more anchored and more broadly based, in that there were no changes in parities and a number of new currencies either joined the ERM itself (the pound sterling, peseta, and escudo all joined in 1990) or, in the case of the currencies of the Nordic countries, were unilaterally pegged against the European Currency Unit (ECU). However, the ERM came under sustained market pressures starting in mid-1992, as cyclical divergences, caused in part by the macroeconomic consequences of German reunification, led to conflicts between the domestic and external requirements for monetary policy in both Germany and the other member countries of the ERM. These pressures led Italy and the United Kingdom to suspend their ERM membership; Finland, Norway, and Sweden to abandon their pegs to the ECU; and Spain and Portugal to devalue their parities. Continuing speculative pressures in the summer of 1993 led to a widening of the intervention bands to their current values of 15 percent (except for the rate of the Netherlands guilder against the deutsche mark).

Exchange arrangements in developing countries are also varied. In addition to the considerations already discussed in relation to industrial countries, developing countries must also take into account large terms of trade shocks and thin underlying financial markets in choosing the appropriate exchange rate regime. As can be seen from Table 1, about 55 percent of developing countries, including many smaller countries, pegged the value of their currencies to the currencies of other countries or baskets of other currencies in 1992—an arrangement that provides a nominal anchor for the conduct of monetary policy. Meanwhile, the remaining 45 percent of developing countries used more flexible exchange rate arrangements.12

Table 1.

Developing Countries: Classification of Exchange Rate Arrangements

(In percent of total number of countries)

article image
Sources: Aghevli, Khan, and Montiel (1991); and International Monetary Fund (1993).

Includes the following categories: “flexibility limited vis-à-vis single currency,” “managed floating,” and “independently floating.”

These arrangements have a significant regional pattern, with countries in Africa and the Middle East generally adopting pegged exchange rates and Asian countries more prone to employ flexible arrangements. In Europe and the Western Hemisphere both types of arrangements are evident. Low-inflation countries are generally associated with pegged rates and high-inflation countries with more flexible arrangements. The percentage of countries adopting flexible exchange rates has risen steadily over time, reflecting both the higher rates of domestic inflation in developing countries during the 1980s and the uncertainty engendered by fluctuations in the values of the major currencies.13 The latter factor indicates that the policy regimes in the major industrial countries can affect the behavior of smaller countries.

Exchange Rate Developments and Policy Coordination Efforts Since 1973

Exchange Rate Developments

Chart 1 shows real and nominal multilateral exchange rates since 1973 for the seven largest industrial economies. The oil price shock in 1973 produced some divergent movements in these exchange rates. The major policy concern, however, was recycling the large increase in the revenues of the oil exporting countries, not exchange rate values.14 By 1977, however, large emerging current account imbalances led an effort to “talk down” the U.S. dollar. The depreciation of the dollar that occurred vis-à-vis the yen and the deutsche mark was eventually regarded as having gone beyond the levels implied by the economic fundamentals; for example, the yen appreciated by 30 percent in real effective terms between August 1977 and August 1978 despite repeated official intervention. By November 1,1978, a “dollar rescue” package was announced, including a $30 billion fund to be used for intervention to support the dollar. About this time, the dollar started to appreciate—a move that was accelerated by the Iranian revolution in December 1978 and the second oil price hike in June 1979—and, by August 1979, the yen was back to about its level of two years earlier in real effective terms (Chart 1).

Chart 1.
Chart 1.
Chart 1.

Major Industrial Countries: Nominal and Real Effective Exchange Rates, January 1973–June 1994

(1985 = 100; logarithmic scale))

Source: IMF staff estimates.

The second oil price hike is also generally regarded as contributing to the 35 percent real effective appreciation of the pound sterling between mid-1979 and early 1981. As the United Kingdom was self-sufficient in oil, an increase in the oil price was clearly beneficial for the pound sterling relative to other major currencies. At the same time, the restrictive monetary policy of the new Government also put upward pressure on the currency. The result was a rapid appreciation of the currency between mid-1979 and early 1981, followed by a relatively gradual decline over the next few years.

The period between 1981 and 1985 was dominated by the steady appreciation of the U.S. dollar, reflecting the expansionary fiscal policy of the Reagan Administration, the successful efforts of monetary policy to bring about a durable reduction in inflation, and a “hands-off” policy with respect to the exchange value of the dollar. Much of this rise in the dollar was regarded with equanimity by the U.S. Administration, in part because it helped to lower inflation during 1981–82 and keep it low during the recovery from the 1982 recession. However, the continuing appreciation of the dollar through 1984 and early 1985 led to increasing concern both inside and outside the United States, as the effects of the appreciated dollar became apparent in large current account imbalances of the major industrial countries, rising protectionist sentiments in the United States, and inflationary pressures in other countries.

This concern prompted coordinated international action by the largest industrial economies to reduce the exchange value of the U.S. dollar.15 While the dollar had already depreciated steadily from its peak in February 1985, the finance ministers and central bank governors of the United States, Japan, Germany, France, and the United Kingdom met on September 22, 1985, at the Plaza Hotel in New York and issued a communiqué that stated that “some further orderly appreciation in the nondollar currencies is desirable” and that they would “stand ready to cooperate more closely to encourage this when to do so would be helpful.” The communiqué did not specify in any detail how this exchange rate movement was to be accomplished, except to say that Japanese monetary policy should “exercise flexible management with due attention to the yen exchange rate.” On the Monday that the Plaza Agreement, as it became known, was made public, the dollar fell by 4 percent against a weighted average of all currencies and by slightly larger levels against the yen and the deutsche mark. The next morning, substantial intervention to encourage this downward movement was reported to have occurred. The dollar then continued to depreciate at about the same rate that had occurred between February and September 1985; this decline was facilitated by a fall in U.S. interest rates and continued multilateral exchange market intervention.16

By September 1986, the U.S. dollar had fallen from its peak of 260 yen to the dollar to 154 yen, and the German and Japanese authorities had started to intervene with the object of supporting the dollar. Subsequently, the dollar continued to decline despite an agreement between the U.S. and Japanese authorities, made public on October 31, 1986, to stabilize the exchange rate of the dollar against the yen in its current range, and for Japan to undertake a fiscal expansion. As concern mounted that the dollar’s decline could become excessive, the finance ministers and central bank governors of the Group of Six industrial countries met at the Louvre in Paris on February 21–22, 1987. The communiqué of what became known as the Louvre Accord indicated that the dollar and other currencies should be stabilized “around current levels” because “the ministers and governors agreed that the substantial exchange rate changes since the Plaza Agreement will increasingly contribute to reducing external imbalances and have brought their currencies within ranges broadly consistent with underlying economic fundamentals…. Further substantial exchange rate shifts among their currencies could damage growth and adjustment prospects in their countries.” These objectives were supported by intervention on the part of a number of central banks, both before and after the meeting, and by the implementation of agreed macroeconomic policies involving an expansion of Japanese domestic demand and tax cuts by several European countries, including Germany.

In public, the participants of the Louvre meeting denied that any target range for the exchange rates had been set. However, Funabashi (1988, pp. 183–87) reported that they discussed a “reference range” of 5 percent around the then current levels of their exchange rates, as well as the obligations that movements outside this range would entail. If such limits were established, they were soon violated by the continued decline in the U.S. dollar. This depreciation persisted through 1987 partly on account of some apparently conflicting statements by authorities in the major industrial countries before the October 19, 1987 stock market crash and the easing of U.S. monetary policy after the crash.

Opinions on the effectiveness of the Plaza Agreement and Louvre Accord differ significantly. Some believe that the Plaza Agreement, together with earlier and later meetings of the largest industrial economies, was an important factor in the decline in the U.S. dollar from its peak.17 These commentators also see the Louvre Accord as taking an important step to slow the decline of the dollar during 1987. Others are more skeptical, arguing that the Plaza Agreement had little to do with the decline in the dollar, which, in their view, was a market correction that would have occurred independently of the behavior of governments. Furthermore, this latter group considers that the attempt to halt the decline of the dollar in 1987 may have helped to precipitate the stock market crash in October of that year by creating an expectation that the Federal Reserve would raise interest rates.18

In the weeks following the stock market crash, the U.S. dollar declined to new lows against the deutsche mark and the yen, as U.S. economic policy focused primarily on domestic economic and financial stability. However, beginning in 1988, the Group of Seven industrial countries resumed efforts at international policy coordination. In general, as reflected in periodic communiqués, the Group of Seven discussions covered the broad range of macroeconomic policy issues of interest to the participating countries, and exchange rates issues were considered in this broader macroeconomic context. From time to time, specific efforts were directed at resisting exchange rate movements regarded as unwarranted by fundamentals and contrary to policy objectives. These efforts were sometimes announced in communiqués, but they did not involve formal commitments to target ranges for exchange rates and were generally perceived as less ambitious than the Louvre Accord. Official intervention—including coordinated intervention by two or more of the central banks of the largest industrial countries—was used to resist movements in the major currencies on a number of occasions from early 1988 through as recently as June 1994.

Policy Coordination Efforts

The impact and effectiveness of efforts at international policy coordination by the leading industrial countries since the Louvre Accord are some-what difficult to evaluate, especially in light of the broad range of macroeconomic issues that these efforts cover. On the one hand, focusing narrowly on the issue of exchange rate volatility, the short-term variability of exchange rates between the three major currencies in the period since the Louvre Accord is essentially the same as it was in earlier subperiods, going back to the beginning of generalized floating in 1973 (Table 2). On the other hand, and probably more important, it would appear from the paths of the real effective exchange rates of the U.S. dollar and the deutsche mark (Chart 1) that episodes of serious overvaluation or undervaluation, particularly of the dollar—as took place in the years before 1987—have been successfully avoided in recent years. By contrast, this result is less clear with regard to misalignments of the yen, in view of its strong real effective appreciation since the summer of 1992. However, as shown in Chart 1, there appears to be a noticeable upward trend in the real effective exchange rate of the yen; the most recent appreciation may therefore reflect in part a continuation of this trend.

Table 2.

Standard Deviation of Monthly Change in Bilateral Real Exchange Rates1

(In percent)

article image
Source: IMF staff estimates.

Real exchange rates are calculated using consumer price indices. Data for 1994 extend through June for all exchange rates except for the Netherlands guilder, which extend through May.

Moreover, it is not clear that the record of misalignments since 1987 represents a significant change from the 1973–80 floating rate period. It may simply be that the economic forces that contributed importantly to the large misalignments of the U.S. dollar between 1980 and 1987—notably the upsurge and subsequent reduction of U.S. inflation and the mix of monetary and fiscal policies implemented in the early 1980s—have not recurred in recent years. Alternatively, it could well be that policy coordination itself helps to forestall the policy errors and imbalances that contribute to serious exchange rate misalignments. In addition, the signals sent by official communiqués and by exchange market intervention may have helped to counteract “bandwagon” effects and other market anomalies that would otherwise have led in recent years to wider swings in exchange rates.

In any event, given the costly experience with serious exchange rate misalignments in the past, there seems to be greater determination among the authorities of major industrial countries to avoid such misalignments—and the policies that contribute to them—in the future. There is now a strong consensus that monetary policies need to focus on the objective of achieving reasonable price stability over the medium term and, accordingly, avoid contributing to the cycles of inflation and disinflation that have been a major source of macroeconomic instability. With the convergence of inflation rates to very low levels in all the major industrial countries, one of the key factors that presumably contributed to past exchange rate instability would be removed. In addition, serious and persistent efforts to reduce fiscal deficits and to put the ratios of public debt to GDP on a downward track should contribute to confidence and overall stability in financial markets, including foreign exchange markets. Thus, as a consequence of both macroeconomic policies better directed toward attaining the key objectives of sustainable growth with reasonable price stability and improved efforts at policy coordination among the largest industrial countries, it is to be hoped that the international monetary system is evolving toward greater exchange rate stability between the major currencies.

Overall Performance Since 1973

Seen from a broad perspective, the underlying economic performance in the period since 1973 has been mixed.19 There has been a continuing expansion of trade in goods and services, both in absolute terms and as a ratio to output (Table 3). The period has also seen a significant expansion in capital flows between economies, as net saving in some countries has been made increasingly available for investment in others.20 At the same time, economic performance, as measured by the two most basic macroeconomic indicators—inflation and growth in real output—has been somewhat disappointing. Inflation rose sharply after 1973 in many countries, in part because of macroeconomic responses to the oil price hikes. More recently, the industrial countries appear to have returned to a period of sustained low inflation, but the same cannot be said for developing countries.

Table 3.

Growth in Real Trade and Real GDP

(Average annual growth rates in percent)

article image
Source: IMF staff estimates.

Real trade is defined as the sum of real merchandise exports and real merchandise imports.

As far as the growth in real output is concerned, it is still unclear how far the decline in performance since 1973 reflects an autonomous return to long-term trends after the “catch-up” from the devastation of two world wars, as opposed to other, more immediate factors.21 However, there is little hard evidence that the slowdown in growth was caused by problems in the international monetary system. The slowdown in economic growth that occurred broadly in the industrial countries after the early 1970s is generally attributed in the economic literature to a significant slowdown in the rate of total factor productivity growth. It is very difficult to establish any link between the slowdown in productivity growth and the change in the nature of the international monetary system, and most economists who have sought to explain economic growth do not point to this particular factor.22 Moreover, a number of economies, particularly in Asia, have experienced exceptionally rapid growth since the early 1970s despite the change in the nature of the international monetary system. More generally, trade has continued to expand faster than output in most regions of the world (Table 3), and investment as a ratio to GDP has remained reasonably high by historical standards.23

6

The papers in Bordo and Eichengreen (1993) provide a detailed discussion of many aspects of the Bretton Woods system.

7

Garber (1993) and Solomon (1982) discuss the factors that led to the breakup of the Bretton Woods system.

8

There are some limits on the options available. In particular, as each of the three largest countries allows its exchange rate to float against the others’, smaller countries do not have the option of participating in a global system of pegged rates.

9

This literature was initiated by Mundell (1961). Taken literally, the literature refers to the option of permanently fixing exchange rates through a common currency. However, most of the arguments are also relevant for the choice between fixed but adjustable and floating exchange rates. See Goldstein and others (1992) and Tavlas (1993) for surveys of the literature.

10

See Goldstein and others (1992) for further discussion of this point.

11

Ungerer and others (1986, 1990) discuss the ERM in considerable detail.

12

Within this group, over one half are classified as floating independently, while most of the rest use a managed floating arrangement.

13

See Aghevli, Khan, and Montiel (1991) for a discussion of the factors affecting the choice of exchange rate arrangements on the part of developing countries.

14

As already noted, there was concern about the volatility of exchange rates within Europe, resulting in the formation of the European “snake” arrangement in 1972 and, later, the exchange rate mechanism of the EMS in 1979.

15

See Funabashi (1988) for an extensive discussion of these actions.

16

Further macroeconomic coordination occurred in March and April 1986, when simultaneous reductions in discount rates were announced by the major central banks, with the aim of stimulating the world economy.

19

Bordo (1993) and Bayoumi and Eichengreen (1994) provide a comparison of economic performance under the current system with that during earlier exchange rate regimes.

20

This development is discussed in the following section.

21

Adams, Fenton, and Larsen (1987) discuss this issue in more detail.

22

See the survey of the literature in Adams, Fenton, and Larsen (1987).

23

For relevant data on this point, see Table 2.3 in Maddison (1991).

  • View in gallery View in gallery

    Major Industrial Countries: Nominal and Real Effective Exchange Rates, January 1973–June 1994

    (1985 = 100; logarithmic scale))

  • Adams, Charles, Paul R. Fenton, and Flemming Larsen, Potential Output in Major Industrial Countries,” in Staff Studies for the World Economic Outlook, World Economic and Financial Surveys (Washington: International Monetary Fund, August 1987).

    • Search Google Scholar
    • Export Citation
  • Aghevli, Bijan B., Mohsin S. Khan, and Peter J. Montiel, Exchange Rate Policy in Developing Countries: Some Analytical Issues, IMF Occasional Paper No. 78 (Washington: International Monetary Fund, March 1991).

    • Search Google Scholar
    • Export Citation
  • Aizenman, Joshua, Exchange Rate Flexibility, Volatility, and Domestic and Foreign Direct Investment,” Staff Papers, International Monetary Fund, Vol. 39 (December 1992), pp. 890922.

    • Search Google Scholar
    • Export Citation
  • Alesina, A., V. Grilli, and G.M. Milesi-Ferreti, The Political Economy of Capital Controls,” in Capital Mobility: The Impact on Consumption, Investment, and Growth, ed. by L. Leiderman and A. Razin (Cambridge, England: Cambridge University Press, 1994).

    • Search Google Scholar
    • Export Citation
  • Barrell, Ray, and Simon Wren-Lewis, Fundamental Equilibrium Exchange Rates for the G7,” CEPR Discussion Paper No. 323 (London: Center for Economic Policy Research, June 1989).

    • Search Google Scholar
    • Export Citation
  • Bayoumi, Tamim, One Money or Many: On Analyzing the Prospects for Monetary Unification in Various Parts of the World, Essays in International Finance, No. 76, Princeton University (Princeton, New Jersey: Princeton University Press, 1994).

    • Search Google Scholar
    • Export Citation
  • Bayoumi, Tamim, and Barry Eichengreen, Macroeconomic Adjustment Under Bretton Woods and the Post-Bretton Woods Float: An Impulse Response Analysis,” Economic Journal, Vol. 104 (July 1994), pp. 81327.

    • Search Google Scholar
    • Export Citation
  • Bordo, Michael D., The Bretton Woods International Monetary System: An Historical Overview,” in A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, ed. by Michael D. Bordo and Barry Eichengreen (Chicago and London: University of Chicago Press, 1993).

    • Search Google Scholar
    • Export Citation
  • Bordo, Michael D., and Barry Eichengreen, eds., A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform (Chicago and London: University of Chicago Press, 1993).

    • Search Google Scholar
    • Export Citation
  • Bruno, Michael, Crisis, Stabilization and Economic Reform (Oxford: Clarendon Press, 1993).

  • Bryant, Ralph C., and others, eds., Macroeconomic Policies in an Interdependent World (Washington: Brookings Institution, 1989).

  • Bryant, Ralph C., Peter Hooper, and Catherine L. Mann, eds., Evaluating Policy Regimes: New Research in Empirical Macroeconomics (Washington: Brookings Institution, 1993).

    • Search Google Scholar
    • Export Citation
  • Calvo, Guillermo A., and Carlos Végh, Inflation Stabilization and Nominal Anchors,” Contemporary Economic Policy, Vol. 12 (April 1994), pp. 3545.

    • Search Google Scholar
    • Export Citation
  • Canzoneri, Matthew B. Exchange Intervention Policy in a Multiple Country World,” Journal of International Economics, Vol. 13 (November 1982), pp. 26789.

    • Search Google Scholar
    • Export Citation
  • Clark, Peter, and others, Exchange Rates and Economic Fundamentals: A Framework for Analysis, IMF Occasional Paper No. 116 (Washington: International Monetary Fund, December 1994).

    • Search Google Scholar
    • Export Citation
  • Coats, Warren L., Reinhard W. Furstenberg, and Peter Isard, The SDR System and the Issue of Resource Transfers, Essays in International Finance, No. 180, Princeton University (Princeton, New Jersey: Princeton University Press, 1990).

    • Search Google Scholar
    • Export Citation
  • Commission of the European Communities, “One Market, One Money: An Evaluation of the Potential Benefits and Costs of Forming an Economic and Monetary Union,” European Economy, No. 44 (Brussels: Commission of the European Communities, October 1990).

    • Search Google Scholar
    • Export Citation
  • Crockett, Andrew, and Morris Goldstein, Strengthening the International Monetary System: Exchange Rates, Surveillance, and Objective Indicators IMF Occasional Paper No. 50 (Washington: International Monetary Fund, February 1987).

    • Search Google Scholar
    • Export Citation
  • Dominguez, Kathryn M., and Jeffrey A. Frankel, Does Foreign Exchange Rate Intervention Work? (Washington: Institute for International Economics, September 1993).

    • Search Google Scholar
    • Export Citation
  • Eichengreen, Barry, Real Exchange Rate Behavior Under Alternative Exchange Rate Regimes: Interwar Evidence,” European Economic Review, Vol. 32 (March 1988), pp. 36371.

    • Search Google Scholar
    • Export Citation
  • Eichengreen, Barry, Epilogue: Three Perspectives on the Bretton Woods System,” in A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, ed. by Michael D. Bordo and Barry Eichengreen (Chicago and London: University of Chicago Press, 1993).

    • Search Google Scholar
    • Export Citation
  • El-Erian, Mohammed, The Regulation and Supervision of Cross-Border Banking,” (unpublished; Washington: International Monetary Fund, 1992).

    • Search Google Scholar
    • Export Citation
  • Feldstein, Martin, Thinking about International Coordination,” Journal of Economic Perspectives, Vol. 2 (Spring 1988), pp. 313.

  • Fishlow, Albert, Lessons from the Past: Capital Markets During the 19th Century and Interwar Period,” Industrial Organization, Vol. 39 (Summer 1985), pp. 383439.

    • Search Google Scholar
    • Export Citation
  • Flood, Robert P. and Nancy Marion, Transmission of Disturbances under Alternative Exchange-Rate Regimes with Optimal Indexation,” Quarterly Journal of Economics, No. 97 (February 1982), pp. 4368.

    • Search Google Scholar
    • Export Citation
  • Frankel, Jeffrey A., and Shang-Jin Wei, Trade Blocs and Currency Blocs,” NBER Working Paper No. 4335 (Cambridge, Massachusetts: National Bureau of Economic Research, April 1993).

    • Search Google Scholar
    • Export Citation
  • Frenkel, Jacob A., and Morris Goldstein, Guide to Target Zones,” Staff Papers, International Monetary Fund, Vol. 33 (December 1986), pp. 63373.

    • Search Google Scholar
    • Export Citation
  • Frenkel, Jacob A., and Morris Goldstein, Macroeconomic Policy Implications of Currency Zones,” in Policy Implications of Trade and Currency Zones (Kansas City: Federal Reserve Bank of Kansas City, 1991).

    • Search Google Scholar
    • Export Citation
  • Frenkel, Jacob A., and Morris Goldstein, and Paul Masson, Characteristics of a Successful Exchange Rate System, IMF Occasional Paper No. 82 (Washington: International Monetary Fund, July 1991).

    • Search Google Scholar
    • Export Citation
  • Funabashi, Yoichi, Managing the Dollar: From the Plaza to the Louvre (Washington: Institute for International Economics, 1988).

  • Gagnon, Joseph E., Exchange Rate Variability and the Level of International Trade,” Journal of International Economics, Vol. 34 (May 1993), pp. 26987.

    • Search Google Scholar
    • Export Citation
  • Garber, Peter, The Collapse of the Bretton Woods Fixed Exchange Rate System,” in A Retrospective on the Bretton Woods System, ed. by Michael D. Bordo and Barry Eichengreen (Chicago and London: University of Chicago Press, 1993).

    • Search Google Scholar
    • Export Citation
  • Goldberg, Linda, Exchange Rates and Investment in United States Industry,” Review of Economics and Statistics, Vol. 75 (November 1993), pp. 57588.

    • Search Google Scholar
    • Export Citation
  • Goldstein, Morris, and others, Policy Issues in the Evolving International Monetary System, IMF Occasional Paper No. 96 (Washington: International Monetary Fund, June 1992).

    • Search Google Scholar
    • Export Citation
  • Goldstein, Morris, David Folkerts-Landau, and others, (1993a), International Capital Markets: Part I. Exchange Rate Management and International Capital Flows, World Economic and Financial Surveys (Washington: International Monetary Fund, April 1993).

    • Search Google Scholar
    • Export Citation
  • Goldstein, Morris, David Folkerts-Landau, and others, (1993b), International Capital Markets: Part II. Systemic Issues in International Finance, World Economic and Financial Surveys (Washington: International Monetary Fund, August 1993).

    • Search Google Scholar
    • Export Citation
  • Goldstein, Morris, and Michael Mussa, The Integration of World Capital Markets,” IMF Working Paper, WP/93/95 (Washington: International Monetary Fund, December 1993).

    • Search Google Scholar
    • Export Citation
  • Goldstein, Morris, David Folkerts-Landau, and others, International Capital Markets: Developments, Prospects, and Policy Issues, World Economic and Financial Surveys (Washington: International Monetary Fund, September 1994).

    • Search Google Scholar
    • Export Citation
  • Group of Ten Deputies, International Capital Movements and Foreign Exchange Markets: Report to the Ministers and Governors by the Group of Ten Deputies (Rome: Bank of Italy, April 1993).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, (1984a), Exchange Rate Volatility and the Level of International Trade, IMF Occasional Paper No. 28 (Washington: International Monetary Fund, July 1984).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, (1984b), Issues in the Assessment of the Exchange Rates of Industrial Countries, IMF Occasional Paper No. 29 (Washington: International Monetary Fund, July 1984).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, (1984c), The Exchange Rate System: Lessons of the Past and Options for the Future, IMF Occasional Paper No. 30 (Washington: International Monetary Fund, July 1984).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, The Role of the SDR in the International Monetary System, IMF Occasional Paper No. 51 (Washington: International Monetary Fund, March 1987).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, Exchange Arrangements and Exchange Restrictions: Annual Report 1993 (Washington: International Monetary Fund, 1993).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, International Financial Statistics, various issues.

  • Jurgensen, P., Report of the Working Group on Exchange Market Intervention,” (Washington: U.S. Treasury Department, March 1983).

  • Krugman, Paul, Louvre’s Lesson: Let the Dollar Fall,” The International Economy, (January/February 1988), pp. 7682.

  • Krugman, Paul, The Case for Stabilizing Exchange Rates,” Oxford Review of Economic Policy, Vol. 5 (Autumn 1989), pp. 6172.

  • Krugman, Paul, Target Zones and Exchange Rate Dynamics,” Quarterly Journal of Economics, Vol. 106 (August 1991), pp. 66982.

  • Maddison, Angus, Dynamic Forces in Capitalist Development: A Long-Run Cooperative View (Oxford and New York: Oxford University Press, 1991).

    • Search Google Scholar
    • Export Citation
  • Mundell, Robert A., A Theory of Optimum Currency Areas,” American Economic Review, Vol. 51 (September 1961), pp. 65765.

  • Mussa, Michael L., Exchange Rates in Theory and in Reality, Essays in International Finance, No. 179, Princeton University (Princeton, New Jersey: Princeton University Press, 1990).

    • Search Google Scholar
    • Export Citation
  • Rhomberg, Rudolf R., Failings of the SDR: Lessons from Three Decades,” in International Financial Policy: Essays in Honor of Jacques J. Polak, ed. by Jacob Frenkel and Morris Goldstein (Washington: International Monetary Fund and De Nederlandsche Bank, 1991).

    • Search Google Scholar
    • Export Citation
  • Schadler, Susan, Maria Carkovic, Alan Bennett, and Robert Khan, Recent Experiences with Surges in Capital Inflows, IMF Occasional Paper No. 108 (Washington: International Monetary Fund, December 1993).

    • Search Google Scholar
    • Export Citation
  • Shleifer, Andrei, and Lawrence H. Summers, The Noise Trader Approach to Finance,” The Journal of Economic Perspectives, Vol. 4, No. 2 (Spring 1990), pp. 1933.

    • Search Google Scholar
    • Export Citation
  • Solomon, Robert, The International Monetary System, 1945–1981 (New York: Harper & Row, 1982).

  • Svensson, Lars E.O., An Interpretation of Recent Research on Exchange Rate Target Zones,” The Journal of Economic Perspectives, Vol. 6 (Fall 1992), pp. 11944.

    • Search Google Scholar
    • Export Citation
  • Tavlas, George, The ‘New’ Theory of Optimum Currency Areas,” The World Economy, Vol. 16 (November 1993), pp. 66385.

  • Tobin, James, A Proposal for International Monetary Reform,” Cowles Foundation Discussion Paper No. 506 (New Haven: Cowles Foundation for Research in Economics at Yale University, October 1978).

    • Search Google Scholar
    • Export Citation
  • Ungerer, Horst, and others, The European Monetary System: Recent Developments, IMF Occasional Paper No. 48 (Washington: International Monetary Fund, December 1986).

    • Search Google Scholar
    • Export Citation
  • Ungerer, Horst, and others, The European Monetary System: Developments and Prospectives, IMF Occasional Paper No. 74 (Washington: International Monetary Fund, December 1990).

    • Search Google Scholar
    • Export Citation
  • Végh, Carlos, Stopping High Inflation,” Staff Papers, International Monetary Fund, Vol. 39 (September 1992), pp. 62695.

  • Williamson, John, The Exchange Rate System, Policy Analyses in International Economics, No. 5 (Washington: Institute for International Economics, 2nd ed., 1985).

    • Search Google Scholar
    • Export Citation
  • Williamson, John, and Marcus Miller, Targets and Indicators: A Blueprint for International Coordination of Economic Policy (Washington, Institute for International Economics, 1987).

    • Search Google Scholar
    • Export Citation
  • Williamson, John, and C. Randall Henning, Managing the Monetary System,” paper presented at a conference on “Managing the World Economy,” Washington, May 1994.

    • Search Google Scholar
    • Export Citation