Representatives of this theory are mainly economists of the neoclassical (monetarist) direction, who preferred freely fluctuating exchange rates. Among them are M. Friedman (head of the Chicago School), F.Mahlup (University of Prestones), A. Lindbek (Stockholm University), G. Johnson (Chikag and London Universities), L. Erhard, G. Girsch, E. Durr (Freiburg School in Germany) and others. The essence of this theory is to justify the advantages of the regime of floating exchange rates compared to fixed ones. The main ones are the following:
automatic balance of payments alignment; free choice of national economic policy methods without external pressure; containment of currency speculation, since in floating exchange rates it acquires the character of a game with a zero result: some lose what, what others win; stimulation of world trade; the foreign exchange market is more efficient than the state determines the exchange rate ratio.
By conviction monetarists, the exchange rate should freely fluctuate under the influence of market demand and supply without government intervention in its regulation. Friedman proposed legislatively prohibiting currency intervention, arguing that “the market will do the work of currency speculators much better than the government. Proponents of the neoclassical direction consider it possible to stabilize the economy by market regulation of the exchange rate and turning floating rates into an automatic regulator of international settlements. However, practice shows the impossibility of abandoning state regulation of foreign exchange relations, which is manifested in a combination of market and state regulation.