| Exchange Rate Regimes and Stability: Where Do We Stand? (2008) | |||||||||||||
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| One of the luxuries of academic life is the ability to ignore problems that cannot be easily solved. Since I get to choose the focus of my research, I try to choose interesting and important problems, but problems that I can handle. This is a luxury that central bankers do not have; some decisions have to be made whether they are easy to make or not. Which brings me to the topic of the session. I have been asked to speak on the issue of exchange rate regimes and stability, and it is one that I have spent much time exploring over the past years. But I do not work on this issue any more. Nor does most of the academic economics profession. The reason is the same: it has simply proven to be too difficult. Despite a large amount of work in the area, we know remarkably little about exchange rates and their linkages (or lack thereof) with other aspects of the economy. I as an academic can simply note this fact and move on to other, more soluble problems. Central bankers and other authorities cannot ignore the issue in this fashion; they have to make choices. Accordingly I want to start not only on a note of humility, but also by openly acknowledging the comfort of being an impotent academic. Exchange Rate Regimes and Commuting Let me begin with an analogy. While I freely admit that both the profession and I know little about exchange rate regimes, exchange rate regimes are similar to commuting patterns, and we all care about commuting. I am currently living in Paris and commuting on business days to Fontainebleau, a small town about 50 kilometers away. The question arises: how should I get back and forth? If I take the train, I have to adhere to a rigorous schedule with a number of associated rules. Still, I have no distractions once I am aboard the train, and can work effectively (as I currently am). | |||||||||||||
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