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Choosing an Exchange Rate Regime
Forthcoming in The Handbook of Exchange Rates, edited by Jessica James, Ian W. Marsh and Lucio Sarno (John Wiley).
The single most important aspect of an exchange rate regime is the degree of flexibility. The matter is of course more complicated than a simple choice between fixed exchange rate and floating. One can array exchange rate regimes along a continuum, from most flexible to least. This chapter reviews the state of research concerning how a country should choose where to locate along this continuum of exchange rate regimes.