It is said that the intermediate exchange rate regimes are no longer feasible - the target zones, crawls, basket pegs, and pegs-adjustable-under-an-implicit-escape-clause - are going the way of the dinosaur.” (Frankel et al 2000).
The Economist (1999, pp 15-16) put the same point more briefly: “Most academics now believe that only radical solutions will work: either currencies must float freely, or they must be tightly tied (through a currency board or, even better, currency union).” The rationale is rather different from the traditional textbook arguments about the choice of exchange rate regime.1 The new argument is a response to the volatility of capital flows and the threat of self-fulfilling speculative attacks: both strong fixes and free floats are immune from attack, at least in a definitional sense.