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Exchange Rate Regimes: Is the Bipolar View Correct?

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Author Info
Stanley Fischer
Abstract

The bipolar or two-corner solution view of exchange rates is that intermediate policy regimes between hard pegs and floating are not sustainable. This paper argues that the proponents of the bipolar view have probably exaggerated their point. The right statement is that for countries open to international capital flows, softly pegged exchange rates are crisis-prone and not sustainable over long periods. However, a wide variety of flexible rate arrangements remains possible. Monetary and exchange rate policy in most countries should not and will not be indifferent to exchange rate movements.

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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 15 (2001)
Issue (Month): 2 (Spring)
Pages: 3-24
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Handle: RePEc:aea:jecper:v:15:y:2001:i:2:p:3-24

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  1. Alberto Alesina & Robert J. Barro, 2002. "Currency Unions," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 409-436, May. [Downloadable!] (restricted)
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  2. Kaplan, Ethan & Rodrik, Dani, 2001. "Did the Malaysian Capital Controls Work?," CEPR Discussion Papers 2754, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Atish R. Ghosh & Anne-Marie Gulde & Jonathan D. Ostry & Holger C. Wolf, 1997. "Does The Nominal Exchange Rate Regime Matter?," Working Papers 97-09, New York University, Leonard N. Stern School of Business, Department of Economics.
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  4. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange Rates and Financial Fragility," NBER Working Papers 7418, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," IMF Working Papers 00/30, International Monetary Fund.
  6. P. B. Kenen, 2000. "Currency Areas, Policy Domains, and the Institutionalization of Fixed Exchange Rates," CEP Discussion Papers 0467, Centre for Economic Performance, LSE. [Downloadable!]
  7. Atish R. Ghosh & Anne-Marie Gulde & Holger C. Wolf, 2000. "Currency boards: More than a quick fix?," Economic Policy, CEPR, CES, MSH, vol. 15(31), pages 269-335, October. [Downloadable!] (restricted)
  8. Sebastian Edwards, 1999. "How Effective Are Capital Controls?," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 65-84, Fall. [Downloadable!] (restricted)
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  9. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," NBER Working Papers 7664, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Alberto Alesina & Robert J. Barro, 2001. "Dollarization," American Economic Review, American Economic Association, vol. 91(2), pages 381-385, May. [Downloadable!] (restricted)
  12. Reinhart, Carmen & Calvo, Guillermo, 2001. "Reflections on Dollarization," MPRA Paper 8206, University Library of Munich, Germany. [Downloadable!]
  13. Cushman, David O. & Zha, Tao, 1997. "Identifying monetary policy in a small open economy under flexible exchange rates," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 433-448, August. [Downloadable!] (restricted)
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  14. Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures," American Economic Review, American Economic Association, vol. 90(2), pages 1-16, May. [Downloadable!] (restricted)
  15. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers 7993, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Inci Ötker & Hugh Bredenkamp & A. Javier Hamann & Esteban Jadresic & R. B. Johnston & Paul R. Masson & Barry J. Eichengreen, 1998. "Exit Strategies: Policy Options for Countries Seeking Exchange Rate Flexibility," IMF Occasional Papers 168, International Monetary Fund.
  17. Calvo, Guillermo A. & Reinhart, Carmen M. & Vegh, Carlos A., 1995. "Targeting the real exchange rate: theory and evidence," Journal of Development Economics, Elsevier, vol. 47(1), pages 97-133, June. [Downloadable!] (restricted)
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  18. Esteban Jadresic & Paul R. Masson & Paolo Mauro & Michael Mussa & Alexander K. Swoboda & Andrew Berg, 2000. "Exchange Rate Regimes in an Increasingly Integrated World Economy," IMF Occasional Papers 193, International Monetary Fund. [Downloadable!]
  19. Inci Ötker & Akira Ariyoshi & Jorge Iván Canales Kriljenko & Karl Friedrich Habermeier & Andrei Kirilenko & Bernard Laurens, 2000. "Capital Controls: Country Experiences with Their Use and Liberalization," IMF Occasional Papers 190, International Monetary Fund. [Downloadable!]
  20. Goodhart, Charles & Schoenmaker, Dirk, 1995. "Should the Functions of Monetary Policy and Banking Supervision Be Separated?," Oxford Economic Papers, Oxford University Press, vol. 47(4), pages 539-60, October. [Downloadable!] (restricted)
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