ABSTRACT
Questions of which exchange rate regimes might be appropriate for countries, and regions larger than countries, have long been central to the concerns of internationally oriented economists, politicians and policymakers. Although the issue seemed to be settled after 1945, when most free-market countries signed up to the Bretton Woods regime of fixed exchange rates, by 1953 the wisdom of that regime was being challenged in a now-classic essay by Milton Friedman. By 1973 the Bretton Woods regime had collapsed and major countries were using flexible rates more or less by default. But by 1979, the core countries of Western Europe had adopted fixed rates with one another, and in 1999, despite widespread skepticism among economists (see Dean, 1997), they went one step further and adopted a common currency.
