ABSTRACT
In ‘A Plan for a European Currency’ Robert Mundell submits that a crawling parity with a widened margin ‘would be a disastrous system for the European countries to adopt’ (p. 147) and that these countries should instead fix their currency values vis-a-vis each other, once and for all. According to Mundell, this solution is necessary in order to ‘kill the sporadic and unsettling speculation over currency prices that ravaged the European markets between 1967 and 1969’ (p. 147) and ‘involved real economic costs in loss of efficiency’ (p. 147). He also maintains that ‘the expectations of exchange rate changes greatly unsettle the money markets, make planning difficult, and, in the long run, weaken the control a government has over economic policy (p. 147).
