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:
“To find the length of an object, we have to perform certain
physical operations. The concept of length is therefore fixed when the operations by which length is measured are fixed: that is, the concept of length involves as much as and nothing more than the set of operations by which length is determined.”
—Percy W. Bridgman (1882–1961)
“My life is superficial, takes no root in the deep world; I ask, When shall I die, and be relieved of the responsibility of seeing a Universe which I do not use? I wish to exchange this flash-of-lightning faith for continuous daylight, this fever-glow for a benign climate.”
—Ralph Waldo Emerson (1803–1882)
“If I die prematurely at any rate I shall be saved from being bored to death at my own success.”
—Samuel Butler (1835–1902)
“I always draw a parallel between oppression by the regime and oppression by men. To me it is just the same. I always challenge men on why they react to oppression by the regime, but then they do exactly the same things to women that they criticize the regime for.”
—Sethembile N., South African black anti-apartheid activist. As quoted in Lives of Courage, ch. 19, by Diana E. H. Russell (1989)
“We make needless ado about capital punishment,—taking lives, when there is no life to take.”
—Henry David Thoreau (1817–1862)
“Our intellect is not the most subtle, the most powerful, the most appropriate, instrument for revealing the truth. It is life that, little by little, example by example, permits us to see that what is most important to our heart, or to our mind, is learned not by reasoning but through other agencies. Then it is that the intellect, observing their superiority, abdicates its control to them upon reasoned grounds and agrees to become their collaborator and lackey.”
—Marcel Proust (1871–1922)