Journal of Economic Perspectives: Vol. 15 No. 2 (Spring 2001)


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Exchange Rate Regimes: Is the Bipolar View Correct?

Article Citation

Fischer, Stanley. 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?" Journal of Economic Perspectives, 15(2): 3-24.

DOI: 10.1257/jep.15.2.3


The bipolar or two-corner solution view of exchange rates is that intermediate policy regimes between hard pegs and floating are not sustainable. This paper argues that the proponents of the bipolar view have probably exaggerated their point. The right statement is that for countries open to international capital flows, softly pegged exchange rates are crisis-prone and not sustainable over long periods. However, a wide variety of flexible rate arrangements remains possible. Monetary and exchange rate policy in most countries should not and will not be indifferent to exchange rate movements.

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Fischer, Stanley (IMF)

JEL Classifications

F31: Foreign Exchange
F33: International Monetary Arrangements and Institutions
F32: Current Account Adjustment; Short-term Capital Movements
O19: International Linkages to Development; Role of International Organizations
O16: Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance


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