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ahorn
ahorn
1:00 PM
Has anybody ever thought of an exchange rate regime that limits the rate of change of an exchange rate, but otherwise lets the exchange rate float? For example, a currency with a relatively higher inflation rate could be limited to a rate of less than 10% depreciation per year and less than 8% appreciation per year. Then those limits would be applied every minute.
 
EnergyNumbers
EnergyNumbers
1:14 PM
@ahorn Didn't China effectively manage its exchange rates that way? It didn't have declared change-rate limits, but wasn't that how it managed it in practice? I think several countries have done this in practice - even if they haven't been upfront about what they were doing. And then there's the Tobin Tax, which has a similar objective, through a completely different mechanism.
 

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