Abstract

In recent years, the experience of many countries with respect to their macroeconomic management has brought the issues of exchange rates, interest rates, and other prices with economy-wide repercussions into the forefront of economic debate. In many instances, particularly in Latin America, exchange rate policies were significantly modified relative to past practices, while wide-ranging financial reforms resulted in substantial changes in interest rate levels and structure. Countries in other areas experienced similar reforms, for example, Israel, Portugal, and Sri Lanka. The modifications were intended to improve the internal balance of the economy and to restore the medium-term viability of the balance of payments. In the event, some countries failed to achieve these objectives, and because the failure was frequently attributed to the pursuit of specific exchange and interest rate policies, many of the previously established policies were reversed.