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Harry Johnson's “Case for flexible exchange rates”—50 years later

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  • Maurice Obstfeld
Abstract
Fifty years ago, Harry G. Johnson published “The Case for Flexible Exchange Rates, 1969”, its title echoing Milton Friedman's classic essay of the early 1950s. Though somewhat overlooked today, Johnson's reprise was an important element in the late 1960s debate over the future of the international monetary system. The present paper has three objectives. The first is to lay out the historical context in which Johnson's “Case” was written and read. The second is to examine Johnson's main points and see how they stand up to nearly five decades of experience with floating exchange rates since the end of the Bretton Woods system. The third is to review the most recent academic critiques of exchange‐rate flexibility and ask how fatal they are to Johnson's basic argument. I conclude that the essential case for exchange‐rate flexibility still stands strong.

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  • Maurice Obstfeld, 2020. "Harry Johnson's “Case for flexible exchange rates”—50 years later," Manchester School, University of Manchester, vol. 88(S1), pages 86-113, September.
    • Handle: RePEc:bla:manchs:v:88:y:2020:i:s1:p:86-113
    DOI: 10.1111/manc.12334
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    1. Richard T. Froyen & Alfred V. Guender, 2022. "The Mundellian Trilemma and Optimal Monetary Policy in a World of High Capital Mobility," Open Economies Review, Springer, vol. 33(4), pages 631-656, September.

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    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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