FOUR MONETARY REGIMES

FIXED EXCHANGE RATE REGIME

• In this regime, the value of a country’s currency is fixed or

pegged to another currency, a basket of currencies, or a
commodity such as golod. The central bank intervenes in the
foreign exchange market to maintain the exchange rate within a
predetermined range. Examples include the Bretton Woods
System (1944-1971) and currency boards.
FLOATING EXCHANGE RATE REGIME

• Floating Exchange Rate: In a floating exchange rate regime, the

value of a country's currency is determined by market forces of
supply and demand in the foreign exchange market. The
exchange rate fluctuates freely, reflecting changes in economic
conditions, interest rates, inflation, and other factors. Central
banks may intervene occasionally to influence their currency's
value but do not have a fixed target.
MANAGED FLOATING EXCHANGE RATE

• Managed Floating Exchange Rate: Also known as a dirty float or a

managed exchange rate regime, this combines elements of both fixed and
floating exchange rates. The central bank intervenes in the foreign
exchange market to influence the exchange rate but does not have a fixed
target. They may intervene to prevent excessive volatility or address
macroeconomic imbalances.
CURRENCY BOARD ARRANGEMENT

• Currency Board Arrangement: Under a currency board arrangement, a

country's currency is fully backed by a reserve of a foreign currency,
typically a stable currency like the U.S. dollar or the euro. The central
bank operates with strict rules and is legally required to exchange domestic
currency for the reserve currency at a fixed rate. This regime ensures a
credible commitment to maintaining a fixed exchange rate and price
stability but limits the ability to conduct independent monetary policy.
• It's important to note that these monetary regimes can vary in their
implementation and flexibility, and there may be other variations or hybrid
systems in practice. The choice of a monetary regime depends on various
factors, including a country's economic goals, stability considerations, and
integration with the global economy.
REPORTED BY:

ALVIN CORDENETE
APRIL ENRIQUEZ