ABSTRACT
WITH greater globalization, international financial institutions face considerable foreign exchange (FX) risk, so it is important to understand the different types of foreign exchange regimes that countries operate under and different factors that affect foreign currency rate. The International Monetary Fund (IMF) in its 2014 Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER) notes a trend for additional foreign exchange liberalization by many countries with a slow global recovery from the Great Recession as well as increased capital flow volatility. Globally, with market conditions improving, most countries returned to more stable FX rate regimes and a relaxing of controls on current and capital transactions (IMF, 2014).
