Flexible Exchange Rates in the Short Run

Paul R. Krugman and

PRK

Paul R. Krugman Princeton University

Rudiger Dornbusch

RD

Rudiger Dornbusch

Discussants: Richard N. Cooper and

RNC

Richard N. Cooper

Marina V. N. Whitman

MVNW

Marina V. N. Whitman

CONSIDERABLE FLEXIBILITY in exchange rates has marked the seventies. A series of events, starting with the appreciation of the deutsche mark in 1969, and including the realignment in the Smithsonian Agreement in 1971 and a second realignment, have brought the world into a period of controlled flexibility of rates. Flexible rates were the mechanism economists had long advocated for attaining external balance,’ but the experience in the last few years has led many to reconsider it.