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The discipline of floating exchange rates is quite different to that of a pegged exchange rate system. No longer is the exchange rate itself the anchor of monetary credibility. Instead, the conventional wisdom has moved towards inflation targeting through interest rate policy as the anchor of monetary credibility. As a result, the emphasis has shifted [...]

Many emerging market countries have chosen to float their currencies only as a last resort and only when they have been forced so to do. Even those who have eventually floated have still sought to manage or interfere in otherwise floating currency markets in some way. From this, we have the idea of “fear of [...]