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International Monetary Fund. External Relations Dept.

Following the 1997–98 financial turmoil, a number of crisis countries in Asia moved toward floating exchange rate systems, and one (Malaysia) moved to a fixed rate. These changes reinforced the bipolar view of exchange rate regimes and the “hollow middle” hypothesis—a vanishing middle ground between floating and a “hard” peg. But some academics have dissented, arguing that these postcrisis countries have pursued exchange rate policies similar to their precrisis ones and that the middle may not have vanished. In a recent IMF study, Postcrisis Exchange Rate Policy in Five Asian Countries: Filling in the “Hollow Middle”? authors Leonardo Hernández and Peter Montiel identify and evaluate postcrisis exchange rate policies (up to the end of 2000) in the five countries most severely affected by the Asian financial crisis—Indonesia, Korea, Malaysia, the Philippines, and Thailand. What exchange rate policies did these countries pursue after the crisis? Did they revert to precrisis exchange rate practices? Why did they make the choices they did, and how should these policies be evaluated?