Special Topic: The AREAER at 65+

International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2015
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Brief History and Recent Developments1

The Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER) helps fulfill several of the fundamental purposes of the International Monetary Fund, as articulated in the Articles of Agreement: to facilitate the expansion and balanced growth of international trade; to promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation; and to assist in the establishment of a multilateral system of payments and in the elimination of foreign exchange restrictions. Since the IMF’s earliest days, the AREAER has served as a primary platform for the systematic and comprehensive collection and dissemination of information on individual countries’ exchange arrangements and exchange restrictions, informing both internal IMF country assessments and policy recommendations as well as external policy and academic and business research. The AREAER is one of the oldest IMF publications and one of two reports required by the Articles of Agreement.

In the beginning…

The First Annual Report on Exchange Restrictions was issued in March 1950, in accordance with Article XIV, Section 4, of the IMF’s Articles of Agreement.2 The obligation to report foreign exchange restrictions was part of the IMF’s task of assisting members in establishing a multilateral system of payments with respect to current account transactions between members and in the elimination of foreign exchange restrictions that hamper the growth of world trade. At that time, in the economic turmoil following World War II, many IMF members opted for the transitional arrangements under Section 2 of Article XIV, which permitted them to maintain and adapt (or introduce under special circumstances) restrictions on payments and transfers for current international transactions.3 It was difficult to distinguish between the effects of transitional arrangements and other restrictions, and so, for completeness, the first annual report also covered restrictions applied in accordance with Article VIII.

The First Issue

The first report comprised two parts. Part I provided a general description of exchange restrictions, which were grouped into three categories—quantitative, cost, and composite restrictions—based on their characteristics, and discussed their application.4 During World War I, the restrictions on foreign trade became extensive. These were further intensified during the Great Depression and carried over into World War II. Countries that became members of the IMF in the wake of the war subscribed to the principle that although restrictions on current transactions may be necessary in certain conditions, they are generally undesirable. However, even when such restrictions had served their original purpose and the need to protect the balance of payments had receded, policymakers were reluctant to remove them because they made it possible for them to pursue policies they otherwise could not. Thus, when the first report was prepared, restrictions were still widespread and were being eliminated more slowly than the IMF’s founders had probably envisaged. Only 5 of the 48 members had accepted the obligation to avoid restrictions on current payments and discriminatory currency practices under Article VIII; the other 43 had chosen to make use of the transitional arrangements under Article XIV, Section 2 (Figure 1).

Part II of the first Annual Report on Exchange Restrictions contained country surveys of those members using the transitional arrangements. The survey provided a uniform format to outline the restrictive features of each country’s exchange regime, including the date of introduction; nature of the restrictive system; and information on exchange rates, payments, and receipts. Where applicable, information on exchange control territory, nonresident accounts, domestic banknotes, and foreign banknotes was also included.

The annual report evolved rapidly during the first few years. By the fourth annual report, the country surveys in Part II contained additional information that became available through the bilateral consultations undertaken under Article XIV.5 Each country survey started with a section on origin and essential features of the restrictive system, which was followed by sections on the country’s exchange rate system and, where applicable, exchange control territory (Table 12). Sections on the administration of controls and the prescription of currency were introduced and the section on exchange payments was divided into imports and import payments and payments for invisibles. Similarly, the section on exchange receipts was split into exports and export proceeds and proceeds from invisibles. Restrictions on capital transactions, previously covered under exchange payments and exchange receipts, became a separate section. As in previous reports, for some countries, information on banknotes and nonresident accounts and tables of exchange rates were also included. A section detailing significant changes from the previous year was introduced in the second annual report to make it easier for the reader to capture the changes in the exchange and trade systems.

Table 12.Comparison of the Sections Covered in the 1950 and 1955 Reports
Date of IntroductionOrigin and Essential Features
Nature of Restrictive SystemExchange Rate System
Exchange RatesExchange Control Territory
Exchange Control TerritoryAdministration of Control
Exchange PaymentsPrescription of Currency
Exchange ReceiptsNonresident Accounts
Table of Exchange RatesImports and Import Payments
Payments for Invisibles
Exports and Export Payments
Proceeds from Invisibles
Table of Exchange Rates
Changes Section

The sixth report, in 1955, was the first to include information on all member countries, at the request of the Executive Directors, who emphasized its value as reference material.6 In the sixth report, countries were grouped into Article XIV members, those that had accepted Article VIII, and nonmember countries. Previous reports included surveys only of Article XIV countries and some nonmembers.

The middle years…

The structure of the report remained essentially the same for more than a decade, but its coverage continued to grow. The reports consisted primarily of country surveys of members and until 1991 of nonmembers (Figure 2). The current title, Annual Report on Exchange Arrangements and Exchange Restrictions, was adopted in 1979. By then, the report had grown along with the IMF’s membership and the inclusion of more detailed information. For instance, the 1978 report was almost 500 pages long. The report extended beyond the information required under Article XIV, in part at the request of Executive Directors but also to give readers a fuller understanding of countries’ exchange systems. The name change reflected the publication’s expanded content.7

Figure 2.Coverage in the Annual Report on Exchange Arrangements and Exchange Restrictions, 1950–2015

Source: Annual Report on Exchange Arrangements and Exchange Restrictions, various issues.

With the second amendment of the Articles of Agreement in 1978, consultations under the amended Article IV became the primary means of implementing exchange rate surveillance by the IMF. The text of the original Article XIV was revised, deleting references to the war period but retaining the spirit of the original article, notably the requirement for an annual report on exchange arrangements and restrictions. The second amendment also introduced annual Article IV consultations for all 138 member countries of the IMF beginning in April 1978. Consultations had previously been mandatory only for those members that retained restrictions on current international payments under the provisions of Article XIV. Although not required by the Articles of Agreement, starting in 1960 consultations similar in scope were undertaken with members that had accepted the obligations of Article VIII. (Only 46 of the 138 members at the end of 1978 had accepted the obligations of Article VIII—Figure 1.) The established process of annual consultation under Articles VIII and XIV became the basis for the consultations under the new Article IV.8 The annual Article IV consultations with member countries became another source of information for the AREAER.

Beginning in 1989, Part I of the AREAER was published separately in the World Economic and Financial Surveys series.9 The first such report was titled Developments in International Exchange and Trade Systems.10 Part II (the country surveys) was still issued annually as required by the Articles of Agreement, but the accompanying commentary was now less frequent: only six such reports were published between 1989 and 2007. The reports based on the country surveys continued to identify major trends and reviewed developments underlying trade and financial system topical issues, such as trade and payment systems, currency convertibility, and foreign exchange markets.

and Now…

The AREAER underwent a major transformation in 1997. Country surveys were organized in a new tabular format covering more than 250 variables grouped under 12 categories, and an electronic database was introduced.11 The major substantial change was expanded coverage of the regulatory framework for capital movements, prompted in part by discussions on extending the IMF’s jurisdiction to international capital movements. A special supplement was issued in 1996, as a pilot for a revamped 1997 annual report,12 which reported on capital transactions for a sample of 52 countries, using readily available data and data collected specifically for the pilot. The electronic database facilitated the way users can make comparisons across countries and over time. The online database now covers the period since 1999. Subscriptions to the database and individual printed annual reports can both be ordered from the IMF Bookstore.

The annual reports now also present information on countries’ exchange rate arrangements in a new way. Information on the classification of exchange rate arrangements for many years relied on the de jure or declared classification. Initially, this meant reporting the par values under the fixed exchange rate system in effect after the founding of the IMF. With the collapse of the par value system in the 1970s, and the adoption of generalized floating of major currencies in 1973, members’ obligations regarding their exchange rate policies changed significantly from what was envisioned under the earlier Bretton Woods system.13 Following the second amendment of the Articles of Agreement in 1978, members were free to choose their own exchange rate arrangement. They were required to notify the IMF of their exchange rate regime on becoming a member and of any change thereafter. Based on these notifications, the IMF classified members’ exchange rate regimes using a method introduced in 1975 and updated in 1982. Members’ exchange rate regimes were grouped according to their degree of exchange rate flexibility, and reporting of exchange rate classification for the most part relied on members’ de jure exchange rate arrangements through 1998.

Beginning with the 1999 annual report, a de facto exchange rate classification was introduced, which distinguished between what members reported and what actual developments showed. The new classification also mapped a country’s exchange rate regime against a monetary framework. With this new de facto classification, the previously observed trend toward more flexible arrangements based on self-reported classifications was less noticeable, and it became evident that exchange rate targeting remained the principal form of exchange rate arrangement.

The de facto classification was revised in 2009 to increase consistency and objectivity and to expedite the classification process, conserve resources, and improve transparency.14 Since 2012, the number of countries classified as having soft pegs has increased markedly and reached its highest level as of April 30, 2015 (Table 3). Soft pegs make up the bulk of exchange rate arrangements worldwide, followed by floating rates. This is likely a reflection of recurring pressure on the exchange rates of many emerging market economies as a result of capital flow volatility and the resulting tendency to increase management of the exchange rate.

The section of the AREAER that covers exchange rates also includes information on multiple exchange rates. In the early reports, for the countries that had multiple effective exchange rates, a table of these rates was included in the country survey. This information was later subsumed into the section on exchange arrangements. With the introduction of the tabular format in 1997, an explicit entry was used to identify the structure of the exchange rate as unitary, dual, or multiple. Starting with the 2006 issue, restrictions and/or multiple currency practices with respect to Articles VIII or XIV were explicitly captured in the country survey.

Starting in 2005, the AREAER included an overview of the developments during the reporting year, a descendent of the original Part I (which had been last published as part of the AREAER in 1988). The overview summarizes developments in exchange rate arrangements, changes in countries’ exchange restrictions, and developments with respect to current and capital transactions and in the financial sector. These changes reflect major trends in the world economy and the international monetary system. For example, growing concern about capital inflows to emerging market economies was reflected in the greater number of measures affecting capital transactions. Drawing on lessons from the global financial crisis, many countries strengthened their prudential (both micro and macro) frameworks, as can be seen by the increase in such changes in the section covering the financial sector.

The growing volume of data supplied by member countries (some country chapters are more than 50 pages long) led to a decision to discontinue printing a paper version of the full report starting with the 2009 issue. Individual country chapters are now published electronically (online and on a CD-ROM) and accompany the printed pamphlet containing the Overview. (Readers still have the option to special-order a paper copy of the full volume, which now comprises more than 3,200 pages.) The database is also available online to registered users.

2008 vs. 2009 edition

Less paper, more bytes

The AREAER in use

The AREAER database is used widely in IMF surveillance and research. For example, the database enables the construction of indices to measure the de jure degree of countries’ financial openness, either overall or for any subset of variables.15 These are created from the descriptive and categorical data in the AREAER and are used, for example, in the IMF’s framework for External Balance Assessment and Reserve Adequacy Assessment. AREAER data can also be used to analyze a broad array of issues related to the cross-border flow of goods, services, money, and capital. Moreover, each country’s staff report on the Article IV consultation contains the AREAER classification of its exchange rate arrangement.

The AREAER also has thousands of external users around the world.16 It is consulted regularly by central bankers, government officials, researchers, educators, commercial banks, international businesses, nongovernmental organizations, and the media. Most users are in North America and Europe, but a significant number of orders for digital and paper copies come from Central and South America, the Asia-Pacific region, the Middle East, and Africa.

The AREAER stands out for its comprehensive, concrete, and detailed information. Now that it is available in a well-organized searchable online format, it is easier to access and more user friendly. According to survey results, it serves purposes ranging from research for internal reports and policy analysis in central banks and government departments to helping commercial banks and international companies make practical business decisions and advise customers. It also serves as basis for academic research (for example, allowing the construction of indices) and is cited as reference material in various publications. The online database has been increasingly used by professionals from various fields. On average, 20 users visit the database each day, with almost 100 visitors a day in the peak months (during the first months of the calendar year and soon after new data releases). Users spend an average of 70 minutes a visit, with some remaining as long as eight hours.17

Although the demand for the printed version of the report has decreased with the introduction of the online database, hundreds of copies are still distributed globally each year. The largest number of orders for print copies come from the United States, but many copies are shipped to China, India, Japan, Russia, and other countries from all income groups.

Indeed, the 2005 survey results show that users believe that the AREAER provides “excellent value for the money” given its unique attributes. Even though most have a strong preference for the online format, there continues to be demand for both the online and print versions. In addition to its many other uses, the AREAER has also been given as an incentive gift. One bank, for example, gave complimentary copies to smaller referring banks and planned to extend the practice to corporate customers.


The AREAER is one of the earliest IMF publications and one of only two reports required by the Articles of Agreement. For more than 65 years, the AREAER has not only successfully served its original purpose of tracking developments in countries’ exchange systems and informing IMF advice, but it has also kept up with the evolving nature of international financial flows. More recently, the AREAER was converted into a digital database in keeping with the times, which sparked growing interest. Given the role that international capital flows play in the global economy, the AREAER, with its unmatched country coverage and breadth of content, remains the primary database for policy, academic, and business research.


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