EXCHANGE RATE REGIMES CHOICE AND THEIR CLASIFFICATION

Abstract

Traditional monetary systems characterized by fixed rates have often caused currency crises. From the exchange rate regimes classification, we find that, as much as the level of developenet grow, the institutions become more mature, and the level of flexibility of the exchange rate regimes, increases. The opposite direction is also valid: the flexibility decrease for low level of developement. This view reflects the obvious distinctions between advanced, emerging and other developing economies. Advanced economies (AEs), with their stronger institutions, can fully profit of flexible regimes and low inflation rates while less developed Emerging markets economies (EMEs), prefer controlled floating regime or pegged their currency against the most powerful currency in order to import credibility.

Keywords

• exchange rate
• flexible exchange rate regime
• fixed exchange rate regime