Abstract
The choice of the appropriate exchange rate regime for any country is an issue that has been extremely important in the past and still is today. It is a policy decision that, to a large extent, conditions the macroeconomic framework of a country. This chapter discusses a number of issues related to this important decision. First it discusses the importance of choosing the exchange rate regime. It then analyzes the implications of the degree of exchange rate rigidity or flexibility for the domestic economy, particularly for other macroeconomic policies. Then it discusses the specific case of the euro area. Finally, it explores the side effects associated with the choice of an exchange rate regime.
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