## Moving to Greater Exchange Rate Flexibility: Operational Aspects Based on Lessons from Detailed Country Experiences

_Occasional Papers, April 30, 2007_

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## Bibliographic details
- Authors: Inci Ötker
- Published: April 30, 2007
- Series: Occasional Papers
- DOI: https://doi.org/10.5089/9781589066243.084

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### Summary and purpose
- Many countries have moved towards more flexible exchange rate regimes over the last decade to take advantage of greater monetary policy autonomy and flexibility in responding to external shocks.
- Some reluctance to let go of pegged exchange rates persists despite the benefits of flexibility.
- The volume presents concrete steps taken by a number of countries in transition to greater exchange rate flexibility and elaborates on the operational ingredients that proved helpful in promoting successful and durable transitions.
- The work aims to provide a "road map" of how operational ingredients were established and coordinated, how their implementation interacted with macro and other conditions, and how they contributed to the smoothness of each transition.

### Key findings and themes
- Benefits of greater exchange rate flexibility:
  - Greater monetary policy autonomy.
  - Increased capacity to respond to external shocks.
- Sources of reluctance to exit pegged regimes:
  - Institutional and operational requirements needed to support a floating exchange rate.
  - Difficulties in assessing the right time and manner to exit.
- Focus on operational ingredients:
  - Identification and elaboration of operational steps and institutional arrangements that aided successful transitions.
  - Emphasis on coordination of these ingredients and interaction with macroeconomic conditions.

### Operational ingredients and country steps (high-level)
- The volume documents concrete steps taken by several countries transitioning to greater flexibility.
- It elaborates on operational elements that proved helpful in promoting successful and durable transitions, including:
  - Establishment and coordination of institutional arrangements.
  - Operational frameworks to support floating exchange rates.
  - Interaction between operational measures and macroeconomic/market conditions to smooth transitions.

### Policy implications and recommendations (implicit in scope)
- Strengthen institutional and operational capacity before and during transition to flexibility.
- Carefully assess timing and sequencing for exiting pegged arrangements.
- Coordinate operational ingredients with macroeconomic policy and market development to enhance durability of transition.

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_Source: https://www.imf.org/en/publications/occasional-papers/issues/2016/12/31/moving-to-greater-exchange-rate-flexibility-operational-aspects-based-on-lessons-from-19760_