An empirical study of risk under fixed and flexible exchange

Abstract

The shift in the international monetary system from pegged to flexible exchange rates has finally provided scholars with empirical material to arbitrate their welfare arguments in favor of or against a floating exchange regime. Since Friedman's celebrated paper (1953) pleading the case for flexible exchange rates, the arguments advanced to support one or another system have been primarily theoretical. Experiences with floating exchange rates were restricted to Canada from 1950 to 1962, to European countries just after World War I, and to smaller countries such as Peru or Thailand which were Jess familiar to American and European scholars. New material could only be found by going back to the nineteenth century when Austria, Russia, and the United States experienced (although not simultaneously) unregulated exchange rates. Given the importance of the controversy, such data were insufficient. The new empirical evidence which begins to be available is welcome; see Aliber (1975) and Whitman (1975) for surveys of recent empirical work.