One main theme of this paper has been that, in the
current global economic context, no single ex-
change rate regime may be prescribed for all coun-
tries. However, it is crucial that the chosen exchange
rate regime be credibly supported by a set of poli-
cies, in particular monetary and fiscal policy, that is
fully consistent with the logic of that regime. The
particular circumstances of the country and of the
times will in turn dictate which policies and regimes
are feasible and appropriate. With rising capital mo-
bility and integration into world asset and goods
markets, however, an increasing number of countries
are moving, and are likely to continue to move, to-
ward the ends of the spectrum that extends from
purely floating exchange rates to very hard pegs.
This “hollowing of the middle” does not mean that
all countries will or should move to the very end of
the exchange rate spectrum. In particular, for any but
the largest and most advanced countries moving to
the floating end of the range of regimes, the behavior
of the exchange rate typically will remain a matter
for policy concern and intervention may occasion-
ally be appropriate. Neither will the middle be hol-
low for some time to come. Thus, crawling pegs or
bands, for instance, can represent viable alternatives
provided, however, that macroeconomic policies be
kept consistent with the particular system that is
chosen.
Taking a broader view of the evolution of the in-
ternational monetary system, the advent of the euro
and the move of a number of countries toward euro-
or dollar-based pegs (possibly as a precursor to full
monetary union or dollarization) indicates a trend
movement toward a bi-or tri-polar system of major
currency areas. At the same time, one would expect
a number of countries to maintain basically floating
exchange rates toward the major currencies while
pursuing efforts at regional monetary cooperation,
particularly within the Mercosur and ASEAN
groups. The realization of the more ambitious pro-
jects for full monetary integration