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)
“Development, it turns out, occurs through this process of progressively more complex exchange between a child and somebody else—especially somebody who’s crazy about that child.”
—Urie Bronfenbrenner (b. 1917)
“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)
“Bourgeois existence is the regime of private affairs ... and the family is the rotten, dismal edifice in whose closets and crannies the most ignominious instincts are deposited. Mundane life proclaims the total subjugation of eroticism to privacy.”
—Walter Benjamin (1892–1940)
“It is a capital mistake to theorize before one has data.”
—Sir Arthur Conan Doyle (1859–1930)
“Just as men must give up economic control when their wives share the responsibility for the family’s financial well-being, women must give up exclusive parental control when their husbands assume more responsibility for child care.”
—Augustus Y. Napier (20th century)