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Time to consider and reform international exchange rate regime

Comments on Max Corden “Global imbalances and the paradox of thrift”, 15/04/2011, http://www.eastasiaforum.org/2011/04/13/global-imbalances-and-the-paradox-of-thrift/

Yes, I'd agree that this is an excellent piece of analysis over the issues of international balance or imbalance.

On top of the views on the core balance issues, I'd add that the past history and various painful experiences have also shown a more difficult issue in terms of excessive volatilities of floating exchange rate regime.

Just consider the dramatic swings and changes in rate between the US and the euro over the short period since the creation of the euro.

How much the rate has changed, back and forth?

Is it compatible with the macroeconomic goal of price stability?

Or, have those changes in the relative price of imports versus exports really reflected the underlying relative economic conditions?

Were they conducive to businesses involved in external trade?

It seems that while free international exchange rates regime has its merits, it also has considerable downside. It is uncertain whether its advantages outweigh its disadvantages.

It may be time to study what an ideal international exchange rates regime should be, so to balance the positive and negative sides to maximise net benefits for all nations.

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