Are Fixed Exchange Rates the Problem and Flexible Exchange Rates the Cure?
AbstractThis paper explains why once non-probabilistic (i.e., a non-ergodic stochastic system) uncertainty is introduced into an orthodox freely flexible exchange rate model, the concept of the elasticity of expectations explains the open economy system will be extremely unstable except under the most stationary of economic circumstances. Alternative fixed exchange rate systems are proposed which will help stabilize the open economy--even when real economic forces are volatile.
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Bibliographic InfoArticle provided by Eastern Economic Association in its journal Eastern Economic Journal.
Volume (Year): 29 (2003)
Issue (Month): 2 (Spring)
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Exchange Rates; Fixed Exchange Rate;
Find related papers by JEL classification:
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F31 - International Economics - - International Finance - - - Foreign Exchange
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