The choice of foreign exchange rate regime匯率制度的選擇

One of the most debated issues in international economics concerns the choice ofexchange rate regime and the ‘pros’ and ‘cons’ of fixed versus flexible or floating exchange rates.
在國際經濟事物中最具爭議的問題之一是關于選擇多種交換的匯率制度以及優點可缺點混雜的固定與靈活的浮動匯率。
Inpractice neither extreme has ever really existed, but it remains useful to use these ideal types as thebasis for drawing some positive and normative conclusions of relevance when choosing a hybridsystem. In this sense, the debate over fixed versus flexible exchange rates is analogous to that betweenperfect competition and monopoly in the economic analysis of market structures.

The below illustration depicts the spectrum of exchange rate regimes. It is interesting to note thatsince the industrial revolution there has been a movement away from fixed towards more flexibleexchange rate regimes for the industrialised world. This trend, however, now appears to be in reversefor the membership of the European Union (EU). The European Exchange Rate Mechanism (ERM) ofthe European Monetary System (EMS), which Britain joined on 8thOctober 1990, is a distinct shiftback to less flexible exchange rates between the participating countries. The proposed continuationalong this path to monetary union would entail the disappearance of exchange rates between EUmember states altogether as a single currency is adopted for use.

Furthermore, there is the notion of an ‘idea’ exchange rate that combines short-term stability (i.e.tends towards a more fixed system) with longer-term flexibility as both the economy concerned, butalso that of the global economic environment will inevitably change over time. Hence, in the short-term the arguments regarding trade preferring greater certainty are foremost, whilst the dangers oflocking a country into a permanent position with other currencies / economies is seen as a potentialproblem in the long-run.http://ukthesis.org/jr/

Fixed versus floating exchange rates固定與浮動匯率

Perhaps the most popular argument in favour of floating exchange rates can be summed up by theexpression,
也許最流行的說法可以概括的表達出對浮動匯率的贊成。
‘the market knows best’. ‘Best’ here implies that a competitive foreign exchangemarket would be a more efficient means of achieving balance of payments equilibrium andadjustments of the exchange rate over time. However, it may also reflect normative preferencesthat market mechanisms are more desirable than leaving decisions to government officials and/ormonetary authorities.(ii) A second argument notes that exchange rates always adjust to ensure continuous equilibriumbetween the demand and supply of the currency. Thus, an efficient market clearing mechanismquickly eliminates temporary disequilibrium positions, based upon the current account theorydiscussed in lecture six. Excess demand for a currency leads to its appreciation, thereby makingimports cheaper and exports more expensive, and consequently reduces the excess demand forthe currency as imports rise and exports fall. Similarly, excess supply of a currency leads to itsfall in value, making exports cheaper and imports more expensive, and therefore stimulatingdemand for the currency through higher exports and lower imports. No one expects theadjustment process to be quite as smooth as this. However, if arbitrage and speculation arestabilising, it provides an efficient and automatic solution to the balance of payments problems.(iii) Floating exchange rates enable countries to operate independent monetary policies. Floating is,according to this viewpoint, essential to restore monetary autonomy for each country, whichwould otherwise be constrained by an arbitrary exchange rate target, thereby allowing it todetermine its own employment and inflation rates. Under fixed systems, the need to maintainlong term competitiveness requires a country to achieve essentially similar inflation rates to othercountries, thereby restricting it from pursuing markedly different economic policies. Under fixedexchange rate regimes, monetary policy is focused upon the maintenance of the exchange rateparity and is therefore not available for other macroeconomic goals. This economic argument isalso sometimes expanded to claim that this element of fixed exchange rates dis-empowersdemocracy since democratic decisions to pursue an economic strategy aimed at securing fullemployment, for example, would be de-railed if inflation remained higher than elsewhere. Acounter argument asserts that, in a world of global financial capital flows and internationalmoney markets, monetary autonomy does not exist. This view holds that interest rates must movetowards a world norm, which negates this criticism of fixed exchange rates to the extent that it isan accurate description of economic reality.這種觀點認為，利率必須在世界規范的范圍內浮動，從而否定了備受人爭議的固定匯率，這是一個準確的描述經濟現實的觀點。#p#分頁標題#e#

Floating rates also insulate the domestic economy from foreign price shocks (i.e. inflationcaused by the USA Vietnam war or raw material price rises such as the 1970s OPEC oil priceshocks). If there is an increase in foreign prices under floating exchange rates, provided theexchange rate moves roughly in line with the fundamental balance of the economy (arguablyexpressed by the PPP relation), the domestic exchange rate would appreciate to prevent theimportation of foreign inflation. Under a fixed exchange rate, the same scenario would leave theexchange rate over-competitive, thereby leading to increased demand for exports and stimulatingdomestic demand. Assuming the economy was already operating at full employment, this wouldcause inflation unless countered by compensatory fiscal or monetary measures. The moredifficult scenario under fixed exchange rates is if the domestic exchange rate becomesuncompetitive. Instead of allowing a currency to depreciate, price and wage downward flexibilitywould be required to ensure a real depreciation. This scenario is difficult to achieve in the shortterm because of wage and price stickiness, and would therefore be likely to require deflation andhigh unemployment. Under floating exchange rates, some of this adjustment can be borne bychanges in relative prices if the fall in the value of the currency allows expenditure switching totake place. This helps to cushion the country from deflationary pressures by causing the rest of

the world to share some of the burden. Consequently, floating rates are deemed more conduciveto economic stability because of their superior ability to adjust to external shocks and relativechanges in domestic prices.因此，浮動利率更有利于經濟的穩定，其卓越的穩定的能力，可以適應外部沖擊和國內價格的相對變化。