When, after the crisis, many commentators attribute the crisis to overvalued exchange rates, and others urge these countries to hold reserves equal to their short-term debt (the so-called Guidotti Rule), is it surprising that authorities intuitively feel justified in resisting appreciations?
But if the correct lessons are to be taken from the crisis, then those countries which do not have strong reasons to go to a hard fix should move decisively away from “fixed-but-adjustable”, to adopt a version of what has become widely-used best practice: allowing the market to determine the rate, leaving considerable volatility (ie not leaning against the wind through frequent intervention), and even when the rate moves significantly away from what are judged to be the “fundamentals”, being prepared to put up with this, and stay the resort to intervention, until the case is overwhelming and the prospect of success good.