Abstract:

International monetary order has gone through a dramatical transformation within the past ten years, and, while at the beginning of the 1990s most member countries of IMF have been implementing the intermediate regimes (soft pegs), nowadays there is a trend towards the corner solutions (hard pegs and floating regimes). However, it has been suggested that these figures may not represent the truth because; they represent only IMF member countries, but not the all countries. Therefore, the thesis that many of the countries have given up intermediate regimes in preference for corner solutions is not accepted by some economists. At present, the following choices appear to be likely for the choice of foreign exchange regimes:  A choice towards increasing flexibility.  A choice towards decreasing flexibility, which also include giving up national currencies.  The view that intermediate regimes are unsustainable.  Factors creating advantages and disadvantages between the choices and the solutions can be listed as follows;  The choice of optimum foreign exchange rate regime is dependent on the conditions of the relevant country and the relevant era  The size of the capital flows  Optimum currency or geographical area There can be a discrepancies between de jure and de facto exchange rate regimes. These diiscrepancies would create difficulties in deciding in which exchange rate regime a particular country should be included. On the other hand, the size of the economy and the management of foreign exchange rate under the existence of international capital flows gains signifcance, particularly in crawling band and managed floating regimes. In this paper we aim to discuss the choice of exchange rate regime both theoratically and by considering actual country experiences.

Keywords: