The Choice Of Exchange Rate Regime In The Process Of Economic Development

Exchange rate is an important relative price index in economy, the exchange rate regime plays an imortant role to improve the external economic relations and to maintain the stability and develoment of an economic system, and different exchange rate regimes mean different policy rules. So choosing an adequate exchange rate regime is a crucial problem which policy authorities faced in the process of economic development. As to developing countries, the importance of choosing an adequate exchange rate regime has become more and more prominent since 1990's when some new phenomena apeared in world economy. It is a contribution for the theoretical framwork of international monetary economics and has pratical values for the stable economics development of developing countries which including our homeland to analyze the choice of exchange rate regime for developing countries through theoretical and empirical and studies and then to provide the general framwork and basic rules for the problem of choosing exchange rate regime in the process of economic development.Using the theories of Open Economy Macroeconomics and the econometric instruments, this paper discusses several prolems with the choice of exchange rate regime for developing countries: (1) dicussing the different economic and walfare effects of different exchange rate regimes on the developing countries which are in different stage of development and whose openness are diverse. (2) Based on above research, analyzing the endogeneity of exchange rate regimes and the decisive factors for choosing exchange rate regimes, and investigate the future directions of the exchange rate regimes in developing countries. (3) Using econometric methods to test the walfare effects and the endogeneity of different exchange rate regimes, and to apply the conclusion of theoretical analysis in the case study about East Asian Economies. Developing countries differ from Developed countries obviously on economic characters, so it's also differ from the latter that the rules of choosing the exchange rate regimes for developing countries. On the other hand, there are many differences among developing countries due to that they are in different stage of economic development. So we must treat the issue concretely according to the economic development process.The main question we need to answer is that which one of all the options is the desirable exchange rate regime which meets the needs of a certain developing country with given economic characters and can maxmize the net profits for this country. This paper try to answer this question based on the research of the inter-influences between exchange rate regime and the performance of domestic economic variables and the nter-influences between exchange rate regime and foreign economic relations.As to domestic sector, the author discuss the influences of different exchange rate regime on growth, inflation, economic stability and financial deepening, and agues that: (1) the relatively fixed exhange rate regimes are more pro-growth for emerging economies; (2) the relatively fixed exchange rate regimes can be useful for control of inflation in developing countries, but it can also be replaced by other monetary rules like inflaiton-targeting; (3) fixed exchange rate regime woulde better to deal with nominal shocks when floating exchange rate regime better to deal with real shocks, but both of them can not entirely insulate the external shocks; (4) the improvement of financial deepening is faster under relative fixed exchange rate regimes. So, according to the domestic economic situations and the policy aims of the developing countries in the given stage of development, the desirable exchange rate regime change through time: in early period of development, the negative effects of floating exchange rate regime would not apeard because that the market(both in real and monetary sector) are less developed, So the developing countries are less-limited to choose exchange rate regime, and it may choose relative floating regime considerd t...