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Monetary History, Exchange Rates and Financial Markets

Essays in Honour of Charles Goodhart, Volume Two

Edited by Paul Mizen

Monetary History, Exchange Rates and Financial Markets is an impressive collection of original papers in honour of Charles Goodhart’s outstanding contribution to monetary economics and policy. Charles Goodhart has written extensively on many of these topics and has become synonymous with his field; the chapters within this book offer a summary of current thinking on his own research subjects and include perspectives on controversies surrounding them.
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Marcus Miller


of ‘Exchange rate regimes in theory and practice’ and ‘Is foreign exchange intervention effective?’ Marcus Miller Given the number of serious currency crises in emerging-market economies during the past 7 years, it makes no sense to talk about reforming the international financial architecture without addressing currency regimes. (Goldstein, 2002) The functioning of the global financial system depends, to a considerable extent, on the choice of exchange rate regime by its constituent members. The Bretton Woods system of fixed but adjustable exchange rate pegs against the dollar worked well ‘so long as capital flows were modest, international inflationary and deflationary pressures were limited, and countries accepted an obligation to direct domestic macroeconomic policies towards achieving external balance’ (Andrew Crockett, 2001, p. 5). But, with increased capital mobility, successive oil shocks and increased policy independence in the core economies, the system collapsed; and no alternative blueprint for exchange rates arrangements has been implemented since. For the 21st century, Andrew Crockett predicts floating rates between G3 economies and increased adoption of regional currency unions by non-core economies. But for many countries that do not currently, and may not in future, join a currency union, there is an open question of how best to conduct their exchange rate policy. What are the options? In a recent monograph advocating ‘managed floating plus’ as the best option for emerging markets open to international capital flows, Morris Goldstein (2002, p. 2) characterises Andrew Crockett as an adherent to the bi-polar view of exchange...

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