Exchange rate regimes and policies: a general view

This article lays out the general economic principles of exchange rate policy and provides an overview of the four country cases that have been included in this special edition of the journal: Mexico, Brazil, Argentina, and Venezuela. Three main currency regimes are discussed – the fixed but adjustable regime (FBAR), the firmly fixed rate, and the floating rate regime. At the same time, the article distinguishes between two main approaches to exchange rate policy: the nominal anchor approach and the real targets approach. The author identifies the costs and benefits of implementing these various exchange rate regimes through the different phases of macroeconomic stabilization and structural adjustment. Although dollarization has become increasingly discussed as another monetary policy option in Latin America, the author notes that this trend is still too incipient to address at any length in this article. JEL Classification: F31; F32.