Two types of target zone proposals: McKinnon and Ohno versus Williamson

Abstract

the 1990s, a series of exchange market crises - beginning with the currencies participating in the exchange rate mechanism (ERM) of the European Monetary System in 1992 and 1993, and continuing with the speculative attacks against the Mexican peso in 1994 and 1995 and the East Asian currencies in 1997 and 1998 have dampened considerably professional support for managed exchange rate regimes in today's world of high capital mobility. Against this background, two renowned proponents of target zones for exchange rates, Ronald McKinnon and John Williamson, has each written an excellent new book reaffirming the authors' advocacy of target zones. McKinnon's Dollar and Yen: Resolving Economic Conflict Between the United States and Japan, co-authored with Kenichi Ohno, resuscitates the case for a target zone regime in the context of the post- 1973 trade disputes between the United States and Japan. Williamson's The Crawling Band as an Exchange Rate Regime: Lessons from Chile, Columbia, and Israel assesses the experiences with target zone regimes of these three countries to press the case that the G-7 countries should also adopt such a regime. It is not generally recognized that the types of target zone regimes advocated by these economists differ fundamentally in terms of their conceptual underpinnings and policy frameworks. Having on hand, therefore, these two recent studies - written in the aftermath of the ERM