Exchange Rate Regimes: Some Lessons from Postwar Europe

45 Pages Posted: 26 Mar 2001

See all articles by Charles Wyplosz

Charles Wyplosz

University of Geneva - Graduate Institute of International Studies (HEI); Centre for Economic Policy Research (CEPR)

Date Written: March 2001

Abstract

Can Europe's post-war experience with fixed exchange rates be useful for today's emerging market countries? A new conventional wisdom suggests that the answer is negative, that in today's world of huge capital flows the only choice is between freely floating exchange rates and hard pegs. The Paper argues to the contrary, that Europe's strategy has much to recommend it. Most European countries have identified trade integration as a key objective, and considered that exchange rate stability was a prerequisite for establishing a level-playing field. The survival of the regime was made possible by widespread financial repression. There is no evidence that such a strategy stunted growth, quite the contrary in fact. Nor is it the case that this strategy is impossible today for other small open economies.

Keywords: Currency crises, exchange rate regimes, liberalization, sequencing

JEL Classification: E30, F30, F40, G20, O10

Suggested Citation

Wyplosz, Charles, Exchange Rate Regimes: Some Lessons from Postwar Europe (March 2001). Available at SSRN: https://ssrn.com/abstract=264455

Charles Wyplosz (Contact Author)

University of Geneva - Graduate Institute of International Studies (HEI) ( email )

PO Box 136
Geneva, CH-1211
Switzerland
+41 22 908 5946 (Phone)
+41 22 733 3049 (Fax)

HOME PAGE: http://heiwww.unige.ch/~wyplosz

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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