SPECIFIC PROPOSAL FOR LIMITED EXCHANGE RATE FLEXIBILITY*
Yale University
I INTRODUCTION
The Bretton Woods agreement put into effect a system of adjustable pegs, a system in which exchange rates were not expected to remain fixed during the lifetime of the agreement. This is why the Articles of Agreement of the International Monetary Fund incorporate a mechanism for modifying exchange rates when needed. Yet the mechanism is a very inefficient one: the Agreement shows many signs of the influence of experts in whose view exchange rate adjustment was merely a method of last resort, i.e. who overestimated the possibility of keeping exchange rates fixed for long periods without harm to the participating countries.
During the ...
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