Fixed Exchange Rate Regime Versus Capital Control
The belief that the fixed exchange rate regime brings with it stability is only partly true, since speculative attacks tend to target currencies with fixed exchange rate regimes, and in fact, the stability of the economic system is maintained mainly through capital control. A fixed exchange rate regime should be viewed as a tool in capital control.
For instance, China has allowed free exchange for current account transactions since December 1, 1996. Of more than 40 categories of capital account, about 20 of them are convertible. These convertible accounts are mainly related to foreign direct investment. Because of capital control, even the renminbi is not under the managed floating exchange rate regime, but free to float, and so it is somewhat unnecessary for foreigners to purchase renminbi.
Read more about this topic: Fixed Exchange Rate
Famous quotes containing the words fixed, exchange, rate, regime, capital and/or control:
“Words can have no single fixed meaning. Like wayward electrons, they can spin away from their initial orbit and enter a wider magnetic field. No one owns them or has a proprietary right to dictate how they will be used.”
—David Lehman (b. 1948)
“The press and politicians. A delicate relationship. Too close, and danger ensues. Too far apart and democracy itself cannot function without the essential exchange of information. Creative leaks, a discreet lunch, interchange in the Lobby, the art of the unattributable telephone call, late at night.”
—Howard Brenton (b. 1942)
“Strange that the vanity which accompanies beauty—excusable, perhaps, when there is such great beauty, or at any rate understandable—should persist after the beauty was gone.”
—Mary A. [Elizabeth, Countess Von] Arnim (1866–1941)
“The basic test of freedom is perhaps less in what we are free to do than in what we are free not to do. It is the freedom to refrain, withdraw and abstain which makes a totalitarian regime impossible.”
—Eric Hoffer (1902–1983)
“For mankind, speech with a capital S is especially meaningful and committing, more than the content communicated. The outcry of the newborn and the sound of the bells are fraught with mystery more than the baby’s woeful face or the venerable tower.”
—Paul Goodman (1911–1972)
“Not being able to control events, I control myself; and I adapt myself to them, if they do not adapt themselves to me.”
—Michel de Montaigne (1533–1592)