ABSTRACT
This chapter aims to compare the exchange-rate regimes using as a background the on-going debate between the exchange-rate prescriptions and monetary-control recommendations of different theorists. A great part of the theoretical contributions that appears in the exchange-rate literature deals with the analysis of models of exchange-rate behaviour. The chapter discusses one of the most popular types of exchange-rate arrangements, namely the fixing of target zones or bands and examines the New Classical approach to exchange-rate questions. Theorists who see money as neutral in the short run argue that equilibrium conditions are determined by real factors and money only affects prices. The chapter also aims to classify theorists as advocates of the ‘long-run neutral view’ when they believe that monetary impulses are capable of affecting the real economy in the short run, due to price viscosity and lags of the market price mechanism.
