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Milton Friedman and the case for flexible exchange rates and monetary rules

Author

Listed:
  • Harris Dellas

    (University of Bern and Bank of Greece)

  • George S. Tavlas

    (Bank of Greece and University of Leicester)

Abstract

Milton Friedman was a strong proponent of flexible exchange rates accompanied by a domestic monetary rule. He believed that such a combination would deliver superior economic performance and would also be more consistent with democratic principles than a regime based on fixed exchange rates and discretionary monetary policy. John Taylor’s recent proposal of a rules-based international monetary system –- based on flexible exchange rates and a Taylor rule for each country - is very much in that spirit and represents a modern rendition of Friedman’s views. Under both the Friedman and Taylor proposals, instead of policy coordination among countries there would be policy harmonization.

Suggested Citation

  • Harris Dellas & George S. Tavlas, 2017. "Milton Friedman and the case for flexible exchange rates and monetary rules," Working Papers 236, Bank of Greece.
  • Handle: RePEc:bog:wpaper:236
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    References listed on IDEAS

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    2. Lai, Jennifer & Chen, Hongyi & McNelis, Paul D., 2020. "Macroeconomic adjustment with managed exchange rates and capital controls: Some lessons from China," Economic Modelling, Elsevier, vol. 91(C), pages 759-768.
    3. Edward Nelson, 2020. "The Continuing Validity of Monetary Policy Autonomy under Floating Exchange Rates," International Journal of Central Banking, International Journal of Central Banking, vol. 16(2), pages 81-123, March.

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    More about this item

    Keywords

    exchange rate systems; monetary rules; Taylor Rule.;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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