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Flexible Exchange Rates

In: Reforming the World’s Money

Author

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  • Roy Harrod

Abstract

THE intellectual case in favour of a system of flexible foreign exchange rates is clear. It is argued that it is impossible to combine a public policy for ensuring full employment and growth, freedom of collective bargaining for wages and salaries, along with freedom for producers to set their own prices, and fixed foreign exchange rates. The positions resulting from the growth policy and the free collective bargaining, etc., as changed from time to time, may be inconsistent with fixed exchanges. Something must give way. The policy of full employment and maximum growth in accordance with the potential of the economy is a social objective of the highest importance, and is now recognized in most countries as having top priority. Subject to what will be argued in this chapter, freedom of collective bargaining and price fixing is also a social objective; any coercion in the field of wages and salaries is not acceptable in a free system. Fixed exchange rates are not an objective at all; they are a technical weapon, which may or may not be best suited to its purpose. No citizen, except perhaps for those technically involved, would be in the least aggrieved if told that it had been decided to change the system of fixed rates.

Suggested Citation

  • Roy Harrod, 1965. "Flexible Exchange Rates," Palgrave Macmillan Books, in: Reforming the World’s Money, chapter 0, pages 34-57, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-00427-0_2
    DOI: 10.1007/978-1-349-00427-0_2
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