Evolution and performance of exchange rate regimes

Kenneth S. Rogoff, Aasim M. Husain, Ashoka Mody, Robin Brooks, Nienke Oomes

Research output: Contribution to journalArticlepeer-review

30 Scopus citations


This study assesses the historical durability and performance of alternative exchange rate regimes, with special focus on developing and emerging market countries. It suggests that the popular bipolar view of exchange rates is neither an accurate description of the past nor a likely scenario for the next decade. While the study confirms that emerging market countries need to consider adopting more flexible exchange rate regimes as they develop economically and institutionally, it also finds that fixed or relatively rigid exchange rate regimes have not performed badly for poorer countries. For countries that have relatively limited financial market development and relatively closed capital markets, fixed exchange rate regimes appear to offer some measure of credibility without compromising growth objectives-with the important proviso that monetary policy must be consistent in avoiding a large and volatile parallel market premium. As countries develop economically and institutionally, there are considerable benefits to adopting a more flexible exchange rate system-although, of course, the following analysis provides only a general guide and should not be interpreted as a one-size-fits-all prescription. For developed countries that are not in a currency union (or headed toward one), relatively flexible exchange rate regimes offer higher growth without any cost in anti-inflation credibility-provided they are anchored by some other means, such as an independent central bank with a clear anti-inflation mandate. One perhaps surprising finding of the quantitative analysis is the remarkable durability of exchange rate regimes outside of emerging market countries, with only 7 percent of all countries changing regimes in an average year over the 1940-2001 period.

Original languageEnglish (US)
Pages (from-to)1-55
Number of pages55
JournalIMF Occasional Papers
Issue number229
StatePublished - 2004

All Science Journal Classification (ASJC) codes

  • Geography, Planning and Development
  • Development


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