The observer of international economic developments—operating within a complex network of trade, financial, and monetary relations among countries—finds that the smooth operation and stability of the global economic system depend primarily on the stability of the international monetary system. Thus, the issue of exchange rate volatility and its effects on overall economic activity remains central to the debate among researchers, governmental bodies, and international organizations amidst the diversity of exchange rate systems.
The objectives of selecting optimal exchange rate regimes have varied with the stages of economic and financial development, especially in the context of growing economic openness, increasing capital mobility, and the challenge posed by discrepancies between officially declared regimes and the de facto regimes adopted in practice based on policy and macroeconomic fundamentals. The continuing debate over which exchange rate regime is best underscores the significance of selecting the most appropriate regime, that helps achieve internal balance (attainment of domestic economic policy goals) and external balance (concerned with the flow of goods, services, income, financial assets, and relative currency values). Therefore, choosing the right regime must be backed by empirical evidence of economic performance.
This has prompted wide-ranging theoretical and empirical studies to answer the still-relevant question in international economics: what evidence supports the macroeconomic performance of various exchange rate arrangements?
Despite differing economic literature—both old and modern—on the ideal exchange rate system to achieve macroeconomic objectives, the search for supporting evidence remains pressing. This is a practical issue that requires shedding light on all aspects and testing them to produce results that assist policymakers in making informed decisions about the most suitable exchange rate regime for macroeconomic variables.
Given the intricate relationship between exchange rate regimes and their effects on macroeconomic performance indicators—and the difficulty in definitively favoring one regime over another—this conference aims to address the following central question: What are the options of central banks in managing exchange rate regimes? and what are their implications for economic performance?
