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The Evolution of Exchange Rate Policy and Capital Controls in Australia

Author

Listed:
  • Guy Debelle

    (International Department, Reserve Bank of Australia, 65 Martin Place, Sydney NSW 2000, Australia)

  • Michael Plumb

    (International Department, Reserve Bank of Australia, 65 Martin Place, Sydney NSW 2000, Australia)

Abstract

After the end of the Bretton Woods system in the early 1970s, exchange rate policy in Australia moved through several regimes over an extended period. The overarching theme was to increase flexibility and efficiency in the Australian currency market and the financial system more generally. This paper documents Australia's gradual move from a fixed to a floating exchange rate and the abolition of capital controls, with an emphasis on the thinking behind various reforms and the practical difficulties encountered during the reform process. Policy reform was often in response to external forces exposing deficiencies in the prevailing system, rather than through a carefully planned path to greater flexibility. Ultimately, a combination of domestic and international factors rendered the move to a flexible exchange rate largely inevitable. (c) 2006 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Suggested Citation

  • Guy Debelle & Michael Plumb, 2006. "The Evolution of Exchange Rate Policy and Capital Controls in Australia," Asian Economic Papers, MIT Press, vol. 5(2), pages 7-29, Spring/Su.
    • Handle: RePEc:tpr:asiaec:v:5:y:2006:i:2:p:7-29
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    Cited by:

    1. Tim Robinson & Tim Atkin & Mark Caputo & Hao Wang, 2017. "Macroeconomic Consequences of Terms of Trade Episodes, Past and Present," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 57(3), pages 291-315, November.
    2. Ric Battellino & Michael Plumb, 2011. "A generation of an internationalised Australian dollar," BIS Papers chapters, in: Bank for International Settlements (ed.), Currency internationalisation: lessons from the global financial crisis and prospects for the future in Asia and the Pacific, volume 61, pages 202-217, Bank for International Settlements.
    3. Susan Black & Joshua Kirkwood & Thomas Williams & Alan Rai, 2013. "A History of Australian Corporate Bonds," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 53(3), pages 292-317, November.
    4. Victor Pontines & Reza Siregar, 2012. "Exchange Rate Appreciation, Capital Flows and Excess Liquidity: Adjustment and Effectiveness of Policy Responses," Research Studies, South East Asian Central Banks (SEACEN) Research and Training Centre, number rp87.
    5. Tim Atkin & Mark Caputo & Tim Robinson & Hao Wang, 2014. "Australia after the Terms of Trade Boom," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 55-62, March.
    6. Alexander Ballantyne & Jonathan Hambur & Ivan Roberts & Michelle Wright, 2014. "Financial Reform in Australia and China," RBA Research Discussion Papers rdp2014-10, Reserve Bank of Australia.
    7. Mr. Craig Beaumont & Li Cui, 2007. "Conquering Fear of Floating: Australia's Successful Adaptation to a Flexible Exchange Rate," IMF Policy Discussion Papers 2007/002, International Monetary Fund.
    8. Rochelle Belkar & Lynne Cockerell & Christopher Kent, 2008. "Current Account Deficits: Tha Australian Debate," Central Banking, Analysis, and Economic Policies Book Series, in: Kevin Cowan & Sebastián Edwards & Rodrigo O. Valdés & Norman Loayza (Series Editor) & Klaus Schmidt- (ed.),Current Account and External Financing, edition 1, volume 12, chapter 13, pages 491-535, Central Bank of Chile.
    9. Guy Debelle & Jacob Gyntelberg & Michael Plumb, 2006. "Forward currency markets in Asia: lessons from the Australian experience," BIS Quarterly Review, Bank for International Settlements, September.
    10. Robert McCauley, 2006. "Internationalising a currency: the case of the Australian dollar," BIS Quarterly Review, Bank for International Settlements, December.
    11. Jonathan Kearns & Philip Lowe, 2011. "Australia's Prosperous 2000s: Housing and the Mining Boom," RBA Annual Conference Volume (Discontinued), in: Hugo Gerard & Jonathan Kearns (ed.),The Australian Economy in the 2000s, Reserve Bank of Australia.
    12. Jonathan Hambur & Lynne Cockerell & Christopher Potter & Penelope Smith & Michelle Wright, 2015. "Modelling the Australian Dollar," RBA Research Discussion Papers rdp2015-12, Reserve Bank of Australia.

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