Viernes de Recomendación: Friedman, float or fix?

For this Viernes de Recomendación, in ASOJOD we want to recommend the essay Friedman: Float or Fix?

In this essay, Steve Hanke questions if Milton Friedman was really an enemy of fixed exchange rates, as commonly and a little naively argued.

The author arrives at some interesting conclusions among which we highlight these:

1. For Friedman, fully fixed as well as fully floating exchange rates are free market compatible, which is not the case of pegged or central-bank's managed exchange rates.

2. For most developing countries, Friedman advocates fixed rather than floating exchange rates due to the politic unfeasibility for central banks to really allow exchange rates to float with no limits.

The economist Jorge Corrales once said: "you don't need to ask if Costa Rica is going to go fully dollarized, you just have to ask when". If this is the case, maybe we should look for a exchange regime allowing a transition as smooth as possible. As El Salvador showed (and with the counter-example of Ecuador), a fixed exchange rate is that intermediate, transition regime to fully dollarization.