The Reverse Relationship between the Choice of Exchange Rate Regime and the Macro-Variables
8 Pages Posted: 19 Jun 2006
Date Written: June 2006
The exchange rate regime is an issue which continuously captures academic interests. Since the exchange rate regime affects all macroeconomic variables in every national economy, the choice - whether fixed or flexible, is quite a sensitive and significant decision. Both, fixed and flexible exchange rate regime, have their advantages and disadvantages. The latter are closely related with a certain level at which the monetary and real variables appear under the one or the other regime. Even though a consensus was reached regarding the positive impact of the fixed regime on the monetary discipline (i.e., low inflation), contradictory arguments still exist for its influence on the economic growth.
Keywords: Exchange rate regime, Fixed regime, Flexible regime, Inflation, Economic growth
JEL Classification: F31
Suggested Citation: Suggested Citation