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Abstract
Since the Fund granted the first stand-by arrangements in the 1950s, its policies regarding the programs supported by such arrangements consistently have emphasized the need for an appropriate structure of relative prices to promote the attainment of a viable balance of payments. In the relatively stable economic environment of the 1950s and 1960s there tended to be more emphasis on adjustments through demand management, and most programs could exclude exchange rate action without seriously compromising their objectives. At the same time, there was a general international commitment to fixed exchange rates. In the 1970s the economic environment changed. Partly in response, commitment to fixed exchange rates was regarded as less important than before, and exchange rate action began to figure in the majority of Fund-supported adjustment programs. In the 1980s, the difficult economic environment, together with the need to correct serious distortions resulting from policy failures, has contributed to a continued increase in the incidence of exchange rate action in Fund-supported programs.
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