But over time, the fashionable paradigm on exchange rate regimes has shifted, for several reasons. First, a number of countries found the use of the exchange rate as a nominal target presented serious problems during the phase of inflation reduction. Even though this strategy might have been quite effective in getting inflation down, inflation came down slowly and greatly eroded their international competitiveness.
There was, also, the “exit” problem. Secondly, there was much more attention on finding an exchange rate regime which would help with the difficult task of adapting to a world of large and sometimes volatile capital flows.