ABSTRACT
In this chapter we consider the use of the exchange rate as an instrument of government policy in a fixed exchange rate system. We discover that most discussions of exchange rate policy differ not in their hypotheses about exchange rate determination but over the policies which are assumed to accompany the exchange rate change or the events which, in a floating rate system, cause the exchange rate to change in the first place. At the end of the day much disagreement in fact depends on value judgements concerning the relative importance of competing policy objectives.
