Exchange Rate Regimes in Emerging Market Economies

Publication | January 2000

Recent financial crises in emerging market economies have called into question the relevance of fixed exchange rate regimes. Indeed, in a world of free capital movements, the management of fixed exchange rates is becoming very challenging.

Recent financial crises in emerging market economies have called into question the relevance of fixed exchange rate regimes. Indeed, in a world of free capital movements, the management of fixed exchange rates is becoming very challenging. This conference examined central issues relating to appropriate exchange regimes for the developing Asia Pacific countries. Four intermediate regimes were more specifically suggested: a flexible exchange rate target (where the band is adjusted in order to stay consistent with the inflation target through the uncovered interest rate parity); target zones with soft margins or buffers; reference rates with a commitment from the authorities not to intervene in a way that would push the exchange rate away from its equilibrium value; and monitoring bands whereby there would be no intervention inside the band, but an announcement that it may intervene outside to push the exchange rate back to the band.

Additional Details

Type
Series
Subjects
  • Finance sector development
  • Governance and public sector management

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