Exchange Rates and the International Adjustment Process

Jorge Braga de Macedo and

JBdM

Jorge Braga de Macedo

Pentti J. K. Kouri

PJKK

Pentti J. K. Kouri Yale University

Discussants: Marina V. N. Whitman and

MVNW

Marina V. N. Whitman

Walter S. Salant

WSS

Walter S. Salant

AFTER only a few years of experience with the system of flexible exchange rates, considerable doubts have arisen about its ability to function smoothly without central-bank intervention in the foreign-exchange markets. Another concern is the problem of balance-of-payments adjustment arising from surpluses of the Organization of Petroleum Exporting Countries and from current-account “imbalances” among industrial countries. These concerns have emerged concretely in recent discussions about the causes of the “weak” U.S. dollar and about the appropriate policy response, if any.