This paper examines the controversy concerning the relative desirability of fixed versus flexible exchange rates by examining whether a country can achieve a smaller variance of domestic output around its full employment path operating under an exchange rate rule or under a money supply rule. The paper finds that neither policy will always dominate the other. However, it does find that if shocks in one market of the economy are large relative to shocks to other markets, then one type of rule can be shown to dominate the other.

Monetary policy; Interest rates; Inflation (Finance)

II. Ways of Describing the Individual Saving Process Psychological Approaches to the Study of Saving It should be pointed out that the review of the literature has presented us with considerable difficulties.As has already been stated, economists have not to any large extent made special studies of the problems concerning individual knowledge, values, and decisions in connection with saving.Nor have psychologists shown any great interest in saving.This means that almost all of the material is only indirectly related to our the- oretical scheme and is difficult to put into systematic form.Researchers who have dealt with the problem of individual saving have had extremely varied backgrounds and aims.A review of their works would require an account of these backgrounds and aims, and we have not considered this to be feasible.It is impossible, for example, without vastly increasing the scope and size of the study, to give an account of business cycle theories, simply because these theories happen to contain some discussion of indi- vidual saving.Nor have we considered it possible, other than very briefly, to report research results or to examine the methodology in the many different studies of individual income, saving, and consumption which abound. 1 These features of a literature review have had to be sacrificed in order to attain a more important goal, namely, that of placing a large number of research efforts within the model to be outlined.A minimum of space has thus been devoted to descriptions of the background and methodological approach of each individual study and of the data presented in the studies.The emphasis is on providing a description of the approaches adopted by various students of saving behavior.We have aimed primarily at providing as complete a coverage as possible of studies with a psycho- logical frame of reference, whereas econometric studies of saving are briefly and incompletely reported.1 Reviews concentrating on research in individual and household economic behavior carried out by means of large surveys, and also dealing with the method- ological problems involved in such studies, have been provided by J. N. Morgan [184, 187].

Bimetallism has been the subject of considerable debate: Was it a viable monetary system? Was it desirable? In our model, the amounts of each metal are split between coined metal, satisfying a cash‐in‐advance constraint, and uncoined metal, yielding utility. The ratio of the monies in the cash‐in‐advance constraint is endogenous. Bimetallism is feasible: we find a continuum of steady states indexed by the constant exchange rate of the monies. Bimetallism is not desirable: among steady states, welfare under monometallism is higher than under any bimetallic equilibrium. Long‐run trends in gold and silver production placed limits on the maintenance of bimetallism at any given ratio, but its sudden collapse in 1873 remains a puzzle.