Doubts About the McKinnon Standard
Abstract[This paper responds to "Monetary and Exchange Rate Policies for International Financial Stability: A Proposal," by Ronald I. McKinnon, in this same issue.] For over ten years, Ronald McKinnon has advocated a new monetary system centered on fixed exchange rates between the Japanese yen, the German mark, and the U.S. dollar. His proposal has fallen on fertile soil because the dramatic volatility in exchange rates makes the financial press and the business community grasp for ready answers. McKinnon's scheme seems to solve the problem of currency instability and to judge from his presentation there are only merits and not one shortcoming. In fact, however, there is little theoretical or empirical basis for his standard. To support this criticism, I will first summarize several of McKinnon's key propositions and prescriptions and then review these in a critical spirit.
CitationDornbusch, Rudiger. 1988. "Doubts About the McKinnon Standard." Journal of Economic Perspectives, 2 (1): 105-112. DOI: 10.1257/jep.2.1.105
- 431 Exchange Rates and Markets--Theory and Studies
- 432 International Monetary Arrangements