This paper discusses the choice of exchange-rate regime. It is argued that in general floating is undesirable, because of the extreme weakness of the economic mechanism that holds the exchange rate close to a level consistent with the fundamentals. Of the alternatives, fixed rates can...

This is an exercise in the positive economics of alternative monetary regimes. The behaviour of output and prices is compared using a stochastic specification which allows asymptotic variances to be obtained without difficulty. Free floating of exchange rates together with national money supply...