Essays in Honour of Charles Goodhart, Volume Two
Edited by Paul Mizen
of ‘Exchange rate regimes in theory and practice’ Jose Viñals The chapter by Andrew Crockett provides a very ﬁne blend of the theoretical and practical issues surrounding a question which in the past has been very controversial and which is likely to remain so in the future: the choice of exchange rate regime. The chapter not only provides a very comprehensive and well-structured review of the subject but also advances interesting ideas. The author is quite right when he states that concerning the choice of exchange rate regime strong opinions are expressed often based on weak theory. Yet it has to be recognized that this is due to the fact that we lack a sound micro-theoretic basis to assess the beneﬁts and costs of alternative exchange rate regimes. Thus the most that can be done at this stage is to go the way the author went in his chapter: to identify a few key guideposts that can help us to better understand this thorny question by bringing together general economic principles and the lessons from the international experience with alternative exchange rate regimes. Another point worth making is that while the chapter studies the choice of regime mainly from a country perspective, it is clear that the exchange rate regime is a key piece of the international ﬁnancial architecture with signiﬁcant implications, for example, for the degree of vulnerability of countries to crises, the incentives to promote an environment of free capital ﬂows or the need to...
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