ABSTRACT
There appears to be no well-established answer to this question. Indeed the question has rarely been posed in this form, even though there are huge literatures on what, at first sight, seem to be related questions. Four obvious strands in the economics literature spring to mind. First, there is the long literature on the issue of fixed versus floating exchange rate regimes. Second, there is a significant body of work on ‘monetary regimes’ with particular emphasis on the evaluation of historical episodes under the three main regimes-gold standard, Bretton Woods and floating. Third, there is the ‘optimal currency area’ literature which ought to ask what is the best currency structure for the world economy, but in practice has been used to ask if country X or region Y is an optimal currency area. Fourth, there is a growing literature on the impact of exchange rate volatility on trade.
