Floating Rates?

I was interested to read inwards the Financial Times, "Iceland weighs excogitation to peg krona to to a greater extent than or less other currency":

Iceland’s finance government minister has admitted it is untenable for the province to keep its ain freely floating currency....Benedikt Johannesson told the Financial Times that the Nordic isle of only 330,000 people would hold back at options to link Iceland’s krona to to a greater extent than or less other currency, near probable the euro or pound.

“Is the condition quo untenable? Yes. Everybody agrees on that. We’d similar to accept a policy that would stabilise the currency. It’s actually non skillful when a currency fluctuates past times 10 per cent inwards the 2 months since nosotros took over,” said Mr Johannesson, who became finance government minister inwards January. 

The primary matter is if you lot desire to peg against a currency, practice it against a currency where you lot practice business. Once you lot create upwardly one's hear on a currency, that volition also modify the future. You volition practice to a greater extent than describe of piece of employment concern amongst that area,” he added, pointing to Denmark’s sense of doing to a greater extent than describe of piece of employment concern amongst Deutschland afterward pegging its currency kickoff to the Deutschmark together with and thus the euro.

This is interesting inwards the context of Conventional Wisdom, which says the euro is a bad idea, together with every tiny province needs its ain currency, to devalue whatever fourth dimension in that place is a "shock." In this view, Republic of Iceland is a non bad success because it did devalue afterward its banking crisis. I am a skeptic, largely favoring a mutual measure of value. Hellenic Republic did non choke a increment tiger from its previous umpteen devaluations. I'm interested that fifty-fifty the supposed success storey for devaluation does non run across it that way.

Update (via marginal revolution) here at Bloomberg. The thought is controversial.

Everyone wants a float afterward the fact, to devalue their fashion out of trouble. But everyone should also desire a peg earlier the fact; the theatre commitment that you lot volition non devalue your fashion out of problem makes international investment together with merchandise period of time much better.