Distinguished Lectures

Alternative Exchange Rate Regimes

Publication Number: ECES-DLS14-E

June, 2000

Author : Michael Mussa

Type : Distinguished Lectures

The exchange rate policy has been a subject of intensive debate in Egypt for years. While this debate is both healthy and beneficial, it has become exceedingly limited and politicized in recent years, focusing on such issues as whether Egypt should devalue the pound or not and the question of accepting IMF conditionality. Perhaps as a result of such limiting factors, very little in-depth discussion has taken place publicly regarding an appropriate exchange rate regime for Egypt that draws on the experience of emerging markets. Michael Mussa’s presentation is a clear break away from this tradition. By means of a systematic and thought-provoking tour of the evolution of exchange rate regimes since WWII, Mr. Mussa invites us to consider exchange rate regimes in industrial countries as well as developing and transitional countries. Broadening the debate to consider international experiences, he argues that a country’s search for an appropriate exchange rate system is a serious undertaking and universal answers simply do not exist. He maintains, however, that while relatively large economies with open capital accounts and healthy banking systems are generally better off adopting more flexible exchange rate regimes, smaller and less integrated economies in the world might find a fixed regime more appropriate. Egypt’s situation was not discussed directly during the presentation. However, various members of the audience raised pointed questions that provoked interesting, although somewhat guarded, responses from Mr. Mussa. Topics such as adopting a more flexible exchange rate regime and the timing for changing the basket in Egypt were discussed. In all, this most recent addition to the Distinguished Lecture Series offers a lot of good food for thought.