SUERF Colloquia and Colloquia Publications 1969-2003 in Figures and Locations
Colloquium 5: Floating Exchange Rates – The Lessons of Recent Experience
Venice, October 1974.
President of SUERF and Chairman of the Colloquium: J.S.G. Wilson Colloquium Book:
Editors:H. Fournier and J.E. Wadsworth
Authors:G. Carli, A.W. Clements, F. Forte, H. Glesjer, N. Kagami, J. van der Linden, R.S. Masera, E. Merigo, G. Pelli, M. Rist, R.W. Russell, H.P. Schär, P. van Veen, T. Yoshino
Publisher:A.W. Sijthoff, Leyden, 1976, xi, 229 pp.
– On the state of the debate:
“In recent years no major theoretical breakthrough has been achieved regarding the fixed-versus floating-rate debate. Rather, there has been a consolidation of the respective arguments in favour of the two regimes formulated essentially on the basis of empirical considerations concerning the following fundamental points: (a) the stabilizing or destabilizing nature of speculation; (b) obstacles to trade and foreign investment deriving from exchange-rate uncertainties; (c) the degree of anti-inflationary discipline imposed by the two regimes; (d) the negative consequence of temporary fluctuations of the exchange rate around the trend.” (G. Carli, Governor of the Banca d’Italia, in the opening address to the Colloquium, pp. 3-5) – Findings according to the elasticity approach:
“... We have stressed: (1) the complex reaction of export and import prices to a movement in exchange rates: we found generally a relatively small deterioration in the terms of trade for manufactured goods in the very early quarters after the depreciation and some further subsequent worsening; (2) the need to disaggregate the balance of currents accounts. The impact of, say, a depreciation will vary even in sign between the various components; (3) the high elasticities in the medium-run but low ones in the short-run; (4) the quite low supply elasticities in the medium-run, especially for raw materials ...
Some of those findings explain the slow adjustment of current payments to changes in exchange rates.” (Herbert Glesjer, Professor at the University of Brussels, p. 45-46)
– Conclusions starting from the monetary approach to the balance of payments:
“... It is misleading to argue that free exchange rates automatically eliminate external payments problems and hence that the policy-makers can direct fiscal and monetary tools towards any desired internal objective. Flexible exchange rates per se need not be unstable but if they make for instability and variability of rates of domestic money creation in the various countries, then they will indeed prove unstable. Such effects will be the more pronounced if the home economy is highly open and integrated with foreign economies. In these conditions the integration of the network of the world market might suffer with a consequent generalised loss in welfare. This suggests that a case can be made to establish, wherever possible, large currency blocks, floating against each other and characterised by stable rules of internal monetary growth.” (R.S. Masera, Economist at the BIS, Basle, p. 55, 65)
– On the impact of the oil shock:
“...If flexible exchange rates are more suitable for conditions where the balance of payments is a small fraction of aggregate domestic product, while fixed rates are better employed in conditions where it is a large part, one has to point out that neither system of exchange can work well with the present enormous oil deficits.” (Francis Forte, Professor and Vice-President Ente Nazionale Idrocarburi, Rome, general rapporteur of the Colloquium, p. 221) – How to assess the experience of flexible rates?
“Flexible rates came into operation in a period of great disturbances which were to a large extent, provoked by the previous experience of fixed exchange rates where frequent adjustments were rendered difficult by the fact that such changes were regarded as a traumatic experience. I would say that floating has not been ‘clean’ ... (The) previous disequilibrium situation was largely due to the excess of the money supply in various countries, a situation that proponents of flexible exchange systems do not suppose, particularly as they believe that a country may try to insulate itself by way of flexibility ...”
(F. Forteibid, p. 221-222)
“... If one wants to judge the present system’s performance one must not forget that it is not a generalized system of floating, or even of managed floating ... Currencies in the ‘snake’ cannot be said to belong to a system of managed floating rates, but to a system of adjustable pegs, since they are committed to a fixed relationship between them. Managed fluctuations may not differ significantly from adjustable pegs ...” (ibid, p. 222)
“... A tendency persists, under flexible exchange rates to reason in terms similar to those employed under fixed rates: i.e. to consider rates behaviour mostly as ‘one way’ and therefore to believe that if a currency has been devalued, it is likely to suffer further devaluations and that if a currency has been revalued, it is likely to be involved in further revaluations. This kind of attitude may be destabilizing.” (ibid, p. 224)
– Towards a hybrid system?
“Il semble donc que le monde devra se contenter d’un système hybride ó les taux de change resteront flottants mais ó les interventions des autorités seront nombreuses. Un tel système devra permettre aux autorités d’un pays de céder devant des fortes pressions sur leur monnaie tout en résistant à des variations de taux qui leur paraỵtront trop fortes ou mal dirigées.” (E. Mérigo, Adviser at the Ministry of Finance, Madrid, p. 174)
Colloquium 6: The Development of Financial Institutions in