At the same time, a flexible exchange rate allows our economy to adjust to disturbances, such as changes in foreign demand for our products or changes in the relative prices of our exports compared with our imports. And it helps us to adjust with less overall fluctuation in output and employment than if the exchange rate did not move.
It may seem surprising that Denmark, which has one of the highest wage levels in the world, has been able to maintain and strengthen its position as one of the world's largest exporters of pork in a fully commercial international market. The explanation is that pig farmers have been able to increase productivity at an astounding pace.