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The international monetary system in the last and next 20 years
[‘On regional monetary arrangements for ASEAN’]

Author

Listed:
  • Barry Eichengreen
  • Raul Razo-Garcia
Abstract
The last two decades have seen far-reaching changes in the structure of the international monetary system. Europe moved from the European Monetary System to the euro. China adopted a dollar peg and then moved to a basket, band and crawl in 2005. Emerging markets passed through a series of crises, leading some to adopt regimes of greater exchange rate flexibility and others to rethink the pace of capital account liberalization. Interpreting these developments is no easy task: some observers conclude that recent trends are confirmation of the ‘bipolar view’ that intermediate exchange rate arrangements are disappearing, while members of the ‘fear of floating school’ conclude precisely the opposite. We show that the two views can be reconciled if one distinguishes countries by their stage of economic and financial development. Among the advanced countries, intermediate regimes have essentially disappeared; this supports the bipolar view for the group of countries for which it was first developed. Within this subgroup, the dominant movement has been toward hard pegs, reflecting monetary unification in Europe. While emerging markets have also seen a decline in the prevalence of intermediate arrangements, these regimes still account for more than a third of the relevant subsample. Here the majority of the evacuees have moved to floats rather than fixes, reflecting the absence of EMU-like arrangements in other parts of the world. Among developing countries, the prevalence of intermediate regimes has again declined, but less dramatically. Where these regimes accounted for two-thirds of the developing country subsample in 1990, they account for a bit more than half of that subsample today. As with emerging markets, the majority of those abandoning the middle have moved to floats rather than hard pegs. The gradual nature of these trends does not suggest that intermediate regimes will disappear outside the advanced countries anytime soon.— Barry Eichengreen and Raul Razo-Garcia

Suggested Citation

  • Barry Eichengreen & Raul Razo-Garcia, 2006. "The international monetary system in the last and next 20 years [‘On regional monetary arrangements for ASEAN’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 21(47), pages 394-442.
    • Handle: RePEc:oup:ecpoli:v:21:y:2006:i:47:p:394-442.
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    File URL: http://hdl.handle.net/10.1111/j.1468-0327.2006.00164.x
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    Citations

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    Cited by:

    1. Rose, Andrew K., 2014. "Surprising similarities: Recent monetary regimes of small economies," Journal of International Money and Finance, Elsevier, vol. 49(PA), pages 5-27.
    2. Bernd Hayo & Ummad Mazhar, 2014. "Monetary Policy Committee Transparency: Measurement, Determinants, and Economic Effects," Open Economies Review, Springer, vol. 25(4), pages 739-770, September.
    3. Matthias Busse & Carsten Hefeker & Signe Nelgen, 2013. "Foreign Direct Investment and Exchange Rate Regimes," Economics Bulletin, AccessEcon, vol. 33(1), pages 843-858.
    4. Philipp Harms & Mathias Hoffmann, 2011. "Deciding to Peg the Exchange Rate in Developing Countries: The Role of Private-Sector Debt," Open Economies Review, Springer, vol. 22(5), pages 825-846, November.
    5. Ahmet Atil Asici, 2010. "Parametric and non-parametric approaches to exits from fixed exchange rate regimes," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 15(4), pages 381-406.
    6. Bersch, Julia & Klüh, Ulrich H., 2007. "When countries do not do what they say: Systematic discrepancies between exchange rate regime announcements and de facto policies," Discussion Papers in Economics 2072, University of Munich, Department of Economics.
    7. Wei, Shang-Jin & Chinn, Menzie David, 2008. "A Faith-based Initiative: Does a Flexible Exchange Rate Regime Really Facilitate Current Account Adjustment?," CEPR Discussion Papers 7076, C.E.P.R. Discussion Papers.
    8. Demosthenes N. Tambakis, 2007. "Fear of Floating and Social Welfare," International Journal of Central Banking, International Journal of Central Banking, vol. 3(3), pages 183-204, September.
    9. Barry Eichengreen & Raul Razo‐Garcia, 2013. "How Reliable Are De Facto Exchange Rate Regime Classifications?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 18(3), pages 216-239, July.
    10. Jurek Michał, 2018. "Choosing the exchange rate regime–a case for intermediate regimes for emerging and developing economies," Economics and Business Review, Sciendo, vol. 4(4), pages 46-63, November.
    11. Bonpasse, Morrison, 2007. "The Single Global Currency - Common Cents for the World (2007 Edition)," MPRA Paper 5879, University Library of Munich, Germany.

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