This book by a finance professor at La Trobe University, Melbourne, surveys the literature of exchange rate regime choice around the world in both past and present circumstances. It reviews three key issues in extensive detail: fixed versus flexible exchange rates, factors that determine exchange rate regime choice, and macroeconomic performance under various exchange rate regimes.
The author, Imad A. Moosa, who has also worked as a financial analyst, financial journalist, international banker, and as a staff member of the International Monetary Fund, believes that different political and economic circumstances warrant each country’s different exchange rate regime choices, be they fixed, floating, or something in between. Success or failure in terms of managing a nation’s currency, then, is the result of making the right choice. “The correlation between exchange rate regime choice and real output, prices, and balance of payments stabilization is expected,” he writes.
Moosa decided to write this book after a spell as an advisor with a group of IMF economists who were trying to set up Iraq’s new currency in 2003. Against his advice, the economists decided to base Iraq’s currency on a managed floating arrangement. Moosa felt that this was a disastrous choice given the country’s instability. This book is his convincing effort to highlight the complexities of exchange rate regime choice and to illustrate important steps for making the best decisions.