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- Title
Uncertainty, Currency Areas and the Exchange Rate System.
- Authors
Aliber, Robert Z.
- Abstract
The theme of this article is that the significant differences between alternative types of exchange rate systems center on the impact of uncertainty on shifts of short-term capital and long-term capital. Shifts of short-term capital among national financial centers may constrain national monetary independence; the smaller the volume of these shifts, the better for obtaining monetary independence. Shifts of long-term capital lead to a redistribution of the world's capital stock and a larger world output; other things being equal, these capital flows should continue until interest rates in the capital-exporting and capital-importing areas are equal--as they would be in a unified currency area. Floating exchange rates are preferable from the point of view of utilization, and pegged rates are preferable in terms of efficiency. The choice between these systems must be made empirically. Capital-exporting countries should prefer floating exchange rates, while capital-importing countries can only determine their net advantage empirically.
- Subjects
FOREIGN exchange rates; UNCERTAINTY; CAPITAL stock; DEMAND for money; FOREIGN trade regulation; ECONOMIC policy; ECONOMETRIC models
- Publication
Economica, 1972, Vol 39, Issue 156, p432
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2552885