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Showing papers on "Foreign exchange market published in 1971"



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TL;DR: In the system of rigidly fixed rates that do not change, there is only limited room or need for a broad, resilient public futures market in currencies, and when there is a role for it, the speculation is one-sided as mentioned in this paper.
Abstract: Under the system of rigidly fixed rates that do not change — the ideal envisioned by some supporters of Bretton Woods — there is only limited room or need for a broad, resilient public futures market in currencies. The central banks plus the large commercial banks can readily provide the need. Under a system of rigidly fixed rates subject to large jumps from time to time — the Bretton Woods system in practice — there is great need for a futures market in currencies to permit foreign traders and investors to hedge against the occasional large changes that will occur. But it is almost impossible for such a market to exist because most of the time there is little for it to do, and when there is a role for it, the speculation is one-sided.

15 citations


Journal ArticleDOI
TL;DR: In this paper, the authors analyse the possible effects of the two-tier foreign exchange market and compare it with other instruments designed to reduce the undesired repercussions of high capital mobility.
Abstract: This paper analyses the possible effects of the two-tier foreign exchange market. This system, which has been in operation in Belgium for over 15 years, has recently found new supporters, as is indicated by the fact that during the international monetary crisis of May 1971 the EEC Commission counselled its adoption. The author first analyses the reasons which may justify restrictions on the freedom of capital movements, both in the short run and in the longer term. Some of the technical characteristics of a two-tier foreign exchange market are then examined before the well-known Mundell analysis of the efficiency of monetary and fiscal policy in an open economy is extended to the case of a country with such a system. Finally, the author draws some conclusions and compares a two-tier system with other instruments designed to reduce the undesired repercussions of high capital mobility.

11 citations


Journal ArticleDOI
TL;DR: In this paper, the authors focus on the question as to whether empirical evidence may provide a basis for rejecting or accepting the latter hypothesis, and the author's inquiry will focus on whether empirically, speculators' influences could be considered destabilizing if their effects were to result in a wider variance of exchange rates, than would be true if speculative activity had not been present.
Abstract: ing from speculators' net profit positions and looking at price movements in a foreign exchange market, Professor Friedman asserts that perhaps speculators' influences could be considered destabilizing if their effects were to result in a wider variance of exchange rates, than would be true if speculative activity had not been present. The issue as to whether speculators make profits on the average of their transactions, although an interesting question, will not be analyzed in this paper. Instead, the author's inquiry will focus on the question as to whether empirical evidence may provide a basis for rejecting or accepting the latter hypothesis. In earlier studies regarding the relationship between speculation and price stability, the view was taken that the above relationship could, in a partial equilibrium analysis, be reduced to the two variable case, whereby price stability or instability could be determined by observing directional movements between the expected price and the current price. (3) As noted by Nicolas Kaldor, in his early pioneering study of speculation, questions concerning price stability or instability could be analyzed in terms of current and expected prime move ments. For instance, in the case of inelastic expectations '' if the expected price is taken as given, speculation must necessarily exert a stabilizing influence: a rise in the current price will be followed by a fall in speculative stocks and vice versa.\"(4) The reasoning behind this is that a rise in the current price would mean a fall in the ratio of the expected to current price. And as a result, *Paper delivered at the Graduate Student Session of the American Economic Association Meeting in Detroit, December 28, 1970. Mr. Dominguez is a graduate student at M. I. T. He I is indebted to Professor J. Bhagwati D. Foley, C. Kindleberger, E. Kuh, E. Solow, P. Samuel son and L. Ehurow, all of whom read this manuscript in some stage of preparation and made helpful suggestions. Nevertheless, the sole responsibility of all errors remains that of the author. 3 Sage Publications Inc. is collaborating with JSTOR to digitize, preserve, and extend access to The American Economist

3 citations