Artus, Jacques R., “Exchange Rate Stability and Managed Floating: The German Experience,” Staff Papers, Vol. 23 (July 1976), pp. 312–33.
Makin, John H., “Eurocurrencies and the Theory of International Money,” presented at the Conference on Eurocurrencies and the Theory of International Money, Washington, October 17–18, 1974.
Williamson, John (1974), “Exchange Rate Flexibility and Reserve Use” (unpublished, International Monetary Fund, August 29, 1974).
Williamson, John (1975), “Exchange Rate Flexibility and Reserve Use,” presented at the Conference on Flexible Exchange Rates and Stabilization Policy, Stockholm, August 26–27, 1975.
Ms. Suss, economist in the Special Studies Division of the Research Department, received her doctorate in economics from the University of Pittsburgh. She has been a member of the faculty of the University of Virginia.
Stability of the market is defined here as meaning that the curves showing the demand for and supply of foreign exchange have the usual slopes. That is, the demand curve has a negative slope and the supply curve either has a positive slope or cuts the demand curve from above.
The data on reserves used refer to gross revenues. These figures do not capture well the net reserve movements of reserve centers and of countries that have large compensatory borrowings. Since it is not possible to obtain data on the timing or volume of compensatory borrowings, gross figures were used.
While some countries did have a floating exchange rate during the period 1968-72 (in particular, Canada has had a floating rate since 1970 and the United Kingdom started to float in July 1972), the international monetary system was essentially one of fixed rates. There was also a brief period of generalized floating from August to December 1971.
Defined as the reserves of all members of the International Monetary Fund plus Switzerland.
The gold component of reserves has been adjusted for effect of the U. S. dollar devaluation in 1971.
For example, both Switzerland and Japan have large swap arrangements between the central bank and the commercial banks, which can show up as changes in their gross reserve figures even though there has been no “use” of reserves.
Some part of this increase may be related to the large loan extended to Italy by the Federal Republic of Germany.
If a country’s reserves grew at a constant rate with respect to world reserves, this measure would have a value of zero, indicating no reserve use.
Switzerland was not included because data were not available.