| Abstract: | Summary It is shown that the most important advantages of fluctuating exchange rates (full employment; protection against the import
of inflation; optimal international specialisation) as well as the disadvantages of this system (instability of the economy;
inflationary pressure; hampering international economic relations) only have a limited validity. On the other hand the advantages
of fixed exchange rates (promoting international trade; impeding internal inflation) and its disadvantages (larger unemployment;
import of inflation) have no more general validity. A crawling peg does not give a solution for fundamental disequilibria
and a widening of the band implies a more difficult task for the authorities. Fluctuating exchange rates always leave open
the possibility of ‘dirty floating’. An adjustable peg with rules for swift adjustment for deficitand surplus countries might well give the best solution. |
