Paul Krugman Exchange-Rate Instability

96

Advocates of flexible rates may be Keynesians who want to change relative prices without changing nominal wages, or monetarists who want to keep national control over the monetary aggregates. Advocates of fixed exchange rates may be new classical economists who believe that prices are perfectly flexible and want a new monetary anchor, or interventionists who fear destabilizing speculation.

C. Paul Hallwood and Ronald MacDonald

International Money and Finance

332

The term 'dirty' floating was used soon after the general move to floating exchange rates in the early 1970s. What it means is that a monetary authority states an official policy of letting the exchange rate float, yet frequently intervenes in the foreign exchange market to manage the exchange rate.