2  BIS central bankers’ speeches  depreciation in the exchange rate is likely to see large scale capital exodus by the short-term investors before the value of their investment is further eroded.
Rigid exchange rate regimes may enhance monetary policy credibility and lower inflation with little costs particularly in countries with low exposure to international capital movements. But as a recent IMF study indicates, these economies are often developing countries. Nevertheless, in emerging economies with relatively large financial markets and large capital movements, rigid exchange rate systems might be quite a risky choice.