ABSTRACT
Fixed exchange rates and floating exchange rates are often presented as opposites. Actually, there are not two but three options: fixed rates, freely floating rates, and controlled floating. The formula of free floating was defended by the American authorities for a short time after August 1971. The floating of the franc in 1948 was a useful expedient that enabled the French government to obtain public acceptance of a necessary devaluation. Floating also served to increase the gap between countries that kept better control over their domestic inflation and those that did less well. Some upward revaluations made possible by the floating helped those in the first group to contain price increases. Some devaluations, also aided by the floating, helped those in the second group to persist in their lax policies and, as a result of the increase in the prices of their imports, stimulated the general rise in prices.
