Fixed monetary regimes – debates and arguments

The paper examines the main arguments defending and rejecting fixed exchange rate regimes. It argues that, contrary to what is claimed and in line with practice, these types of regimes have more advantages than disadvantages. They make trade and international coordination significantly more efficient and predictable. Many of the arguments about the loss of degrees of freedom in monetary and macroeconomic policy-making, and the loss of sovereignty, need to be relativised. This is done in this first part of the paper. In the second part, to be published in the next issue, we present different institutional forms that can overcome the problems surrounding fixed exchange rates in different ways, namely currency boards and dollarization, capital controls, and different models of clearing unions.