Facoltà di scienze economiche

World monetary disorders : exchange rate erratic fluctuations

Cencini, Alvaro

This paper shows why all analyses proposed to explain and predict exchange rate fluctuations have not fulfilled their ambitious aim and it investigates how the problem should be tackled in order to develop a solution that guarantees an intrinsic exchange rate stability. In the first two sections it is proved that, contrary to what is often believed, exchange rate fluctuations are caused by... Plus

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    Summary
    This paper shows why all analyses proposed to explain and predict exchange rate fluctuations have not fulfilled their ambitious aim and it investigates how the problem should be tackled in order to develop a solution that guarantees an intrinsic exchange rate stability. In the first two sections it is proved that, contrary to what is often believed, exchange rate fluctuations are caused by neither commercial nor financial transactions. The third and fourth sections are concerned with the hypothetical influence of national monetary disorders (inflation and deflation) and of interest rates on exchange rates, while the fifth deals with speculation and the sixth with the relationship between exchange rates and external debt servicing. The need to move from a system of relative exchange rates to one of absolute exchange rates is dealt with in the last section, where it is shown also that the anomaly of the current system of international payments lies in the fact that currencies are transformed from means into objects of payment.