Controversy Over Choice of Exchange Rate Regime

Abstract

The trend toward growing international financial integration using market-based processes in the last quarter of the twentieth century was accompanied by a distinctive parallel trend in thinking among economists about exchange rate regimes. Our focus in this chapter will be on the policy choice of exchange rate regimes; it will not be exhaustively surveying the more technical and theoretical concerns of economists with exchange rate determination in the short run or long run. The purpose of the following discussion is to explain the main features and dimensions of the exchange regime choice — a choice informed by events, long-run historical research, more technical econometric research, and by more subterranean philosophical and doctrinal factors.