Why Markets in Foreign Exchange Are Different From Other Markets

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Creator Series Issue number
  • Vol. 14, No. 1
Date created
  • 1990 Winter
Abstract

  • This paper, originally published in the fall 1979 Quarterly Review, explains why unfettered markets cannot determine a price at which the currency of one country exchanges for that of another. In effect, any price will work—something which is not true in other markets. The paper then argues that the only feasible regimes for these special markets are floating exchange rates with capital controls or fixed exchange rates with monetary and budget policy coordination.

Related information Corporate Author
  • Federal Reserve Bank of Minneapolis. Research Department
Publisher
  • Federal Reserve Bank of Minneapolis
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