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Exchange Rate Regimes: Some Lessons from Postwar Europe

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  • Wyplosz, Charles

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2723.

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Date of creation: Mar 2001
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Handle: RePEc:cpr:ceprdp:2723

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Related research

Keywords: Currency Crises; Exchange Rate Regimes; Liberalization; Sequencing;

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References

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Cited by:
  1. Charles WYPLOSZ, 2001. "How Risky Is Financial Liberalization In The Developing Countries?," G-24 Discussion Papers 14, United Nations Conference on Trade and Development.
  2. Eduard H. Hochreiter & Pierre L. Siklos, 2004. "From Floating to Monetary Union: The Economic Distance between Exchange Rate Regimes," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  3. Dai, Meixing & Sidiropoulos, Moïse, 2003. "Inflation Targeting, Capital Mobility and Macroeconomic Stability," MPRA Paper 13858, University Library of Munich, Germany, revised May 2005.
  4. Hans-Joachim Voth, 2003. "Convertibility, currency controls and the cost of capital in Western Europe, 1950-1999," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(3), pages 255-276.
  5. Stefano Battilossi, 2003. "Capital Mobility And Financial Repression In Italy, 1960-1990: A Public Finance Perspective," Working Papers in Economic History wh030602, Universidad Carlos III, Departamento de Historia Económica e Instituciones.

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