Kicking the habit: moving from pegged rates to greater exchange rate flexibility
- 1999
- p.C-1-14
- Mar
Why do governments find it so difficult to move from pegged exchangte rates to greater exchange rate flexibility? I first establish that there is a problem to be solved: that there are powerful incentives for greater flexibility deriving from changes in the international economic and financial environment but that policymakers find it difficult to engineer a smooth transition. I offer practical suggestions and a framework under which the probability of a smooth transition can be maximised. Drawing examples from recent economic history, I then attempt to understand the experience of selected countries which have undertaken this transition. - Reproduced