RECENT DEBATES on fixed versus flexible exchange rates have stemmed largely from concern that the par value regime set up at Bretton Woods has been too rigid, but a second frequent criticism is that, in practice, many Fund members have not adhered to par values. An impression commonly prevails that many members either have never established par values, or more often, once having established par values as a condition for access to Fund resources, have gradually conducted fewer transactions at foreign exchange rates based on these par values.1 Accordingly, for a great number of countries, par values are often thought to be nominal.
This paper elaborates the introduction of surveillance that gave the IMF broader responsibilities with respect to oversight of its members’ policies than existed under the par value system. The IMF’s purview has been broadened under the new system but, by the same token, its members are no longer obliged to seek its concurrence in changes in exchange rates. The continuing volatility of exchange rates, and their prolonged divergence from levels that appear to be sustainable over time, have been matters of growing concern.