Exchange rate regime

**Exchange Rate Regime Types:**
– **Floating Rate:**
– Exchange rate determined by market forces
– Influence of open-market operations, buying/selling currency reserves, changing interest rates, and foreign trade agreements

– **Fixed Rate:**
– Home currency value directly proportional to another currency or commodity
– Many currencies fixed to major currencies like USD, EUR, or GBP
– Historical pegging to gold in the past
– Loss of monetary autonomy but exchange rate stability

– **Intermediate Rate Regime:**
– Band/target zone with tiny variation around fixed rate
– Crawling peg/band with steady depreciation/appreciation
– Currency basket peg to minimize currency fluctuation risk
– Examples: Denmark, Colombia, and Chile

– **Currency Board:**
– Exchange rate pegged to foreign currency
– Requires intervention to maintain fixed rate
– Examples: Hong Kong dollar and Bulgarian lev
– Peg made durable with special legal rules

– **Dollarisation:**
– Unilateral adoption of another country’s currency
– Popular choices: USD, EUR, AUD, NZD
– Cost-saving measure for countries without central banks
– Examples: countries using USD as their currency

**Currency Union:**
– Two or more countries using the same currency
– Transnational structure like a single central bank
– Examples: Eurozone, CFA/CFP franc zones, Latin Monetary Union
– Aimed at fostering economic integration and stability

**Authors and Publications:**
– Sebastian Edwards & Eduardo Levy Yeyati (2003) – NBER Working Papers 9867
– Andrea Kiguel & Eduardo Levy Yeyati (2009) – Fear of appreciation in emerging economies
– Rajnish Tiwari (2003) – Post-Crisis Exchange Rate Regimes in Southeast Asia
– Eduardo Levy-Yeyati, Federico Sturzenegger & Iliana Reggio (2006) – Endogeneity of Exchange Rate Regimes
– Nenovsky & Dimitrova (2006) – Exchange Rate and Inflation in France and Bulgaria

**Historical Studies:**
– Nenovsky, Pavanelli & Dimitrova (2007) – Rate Control in Italy and Bulgaria in the Interwar Period
– Roberto Frenkel & Martín Rapetti – History of Exchange Rate Regimes in Latin America
– Coudert & Couharde (2008) – Currency Misalignments in Emerging and Developing Countries

**Research Papers, Books, and Studies:**
– Various research papers and studies on exchange rate regimes by different authors
– Titles include ‘Flexible Exchange Rates as Shock Absorbers’, ‘A Concise History of Exchange Rate Regimes in Latin America’, etc.
– Retrieved from a Wikipedia article on exchange rate regime