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Discussion Paper Details

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Title: Harry Johnson's "Case for Flexible Exchange Rates" - 50 Years Later

Author(s): Maurice Obstfeld

Publication Date: March 2020

Keyword(s): dominant currency pricing, effective lower bound, exchange rate regimes, Floating Exchange Rates, Global financial cycle, global value chains and international monetary system

Programme Area(s): Economic History and International Macroeconomics and Finance

Abstract: Fifty years ago, Harry G. Johnson published "The Case for Flexible Exchange Rates, 1969," its title echoing Milton Friedman's earlier classic essay of the early 1950s. Though somewhat forgotten today, Johnson's reprise was an important element in the late 1960s debate over the future of the international monetary system. The present paper has three objectives. The first is to lay out the historical context in which Johnson's "Case" was written and read. The second is to examine Johnson's main points and see how they stand up to nearly five decades of experience with floating exchange rates since the end of the Bretton Woods system. The third is to review the most recent academic critiques of exchange-rate flexibility and ask how fatal they are to Johnson's basic argument. I conclude that the essential case for exchange rate flexibility still stands strong.

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Bibliographic Reference

Obstfeld, M. 2020. 'Harry Johnson's "Case for Flexible Exchange Rates" - 50 Years Later'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14488