Revelation And Analysis Of Exchange Rate Regime Choice In India, Poland And Singapore

Exchange rate regime refers to a series of institutional arrangements or policies and regulations made by the monetary authority of a country on the determination of the national exchange rate level, and fluctuation way, etc., serving as an essential component of the economic system of a country. Theoretically, current exchange rate regime can be divided into 9 categories from monetary union to completely free-floating exchange rate regime, such as monetary union, currency board arrangement, conventional fixed peg arrangement, pegged exchange rates within horizontal bands, crawling pegs system, basket-pegged exchange rate regime, exchange rates within crawling bands, managed floating with no pre-announced path for exchange rate, and independent floating.According to time sequence ,the development of exchange rate regime selection theories can be divide into the following several stages: the competiton between floating exchange rate and fixed exchange rate in 1950s; optimum currency area theory in 1960s; theory of economic structure and the exchange rate regime selection of developing countries in 1970s; the renovated fixed exchange rate regime in the 1980s; and the monetary crisis and exchange rate regime in 1990s.Currently, in the reform process of exchange rate regime around the world, India, Poland as well as Singapore have achieved great success in promoting reform of exchange rate regime with fully exertion of the status of its economic development, becoming an illustration of reform of exchange rat regime and serving as references.India has implemented the managed floating exchange rate regime since 1993.At the time,the reform of exchange rate regime was facilitated by influences of international and domestic economies and politics. The feature that facilitated this exchange rate regime reform lied in that the government intervened the exchange rate market to smooth out the excessive fluctuation of the exchange rate according to actual need but with no pre-announced path for exchange rate and with no setting central exchange rate.Reserve bank carried on the periodic evaluations on the real neutral effective exchange rate, and made adjustments based on changes of economic fundamentals, etc., and set up the range of regulation and control, which was a compromising choice between fixed and floating exchange rate. Practice has proved that, the exchange rate regime reform and the related reform measures of India have succeeded in resisting Asian financial crisis and promoting the whole improvement of Indian economy.The progressive exchange rate reform that Poland adopted during 1990-2000 has become the "progressive classic of exchange rate reform". It adopted basket exchange rate as the transition form of progressive reform, expanded crawling band constantly through Zloty peg and crawling peg basket of currency, finished the transition comparatively steadily from basket-pegged regime to crawling peg basket of currency and to crawling peg band floating, and finally realized the completely free floating. The exchange rate regime reform was closely coordinated with the macro-economic situation, complied with the domestic and international economic and financial changes at different periods, was adjusted constantly according to the situation changes, controlled the risks effectively, and solved the national economic difficulties in Poland at that time.Since 1973, Singapore has adopted the managed floating exchange rate regime with reference to a basket of currencies. This regime has the following characteristics: a basket of currencies is chosen to be the management reference of SGD exchange rate, and compositions of currency basket are the main trade partners and rivals of Singapore; exchange rate fluctuation intervals are set up to manage the exchange rate; fluctuation intervals of exchange rate and compositions of monetary basket are adjusted regularly, and Monetary Authority of Singapore (MAS) has carried on one assessment on the management intervals in every three months regularly; intervention in foreign exchange market aiming the exchange rate of SGD against US dollar. The guideline principle of Singapore government to make exchange rate policy is: the exchange rate goal can not deviate from the economic fundamentals for a long time. Meanwhile, in order to achieve steady exchange rate of Singapore dollars, the Singaporean government has set up the supporting measures in such aspects as the monetary issuance, financial policy, accumulation fund plan and wage system, etc. which are helpful for the shaping of internal mechanism of steady exchange rate. The effect of exchange rate arrangement of Singapore was prominent: exchange rate of Singapore dollars was kept basically steady; the interest rate and commodity price were kept steady; the economy was kept steady and under development; the status of Singapore in the international economy was consolidated and promoted.Economic transition stage of our country has some similarities with those of the three countries described above, and our exchange rate regime has also passed the progressive transition from fixed exchange rate regime to floating exchange rate regime. The managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies implemented since the exchange rate regime reform made in July 2005, which was in conformity with the economic development of our country, had promoted the healthy development of our national economy effectively. But there were also some problems: first, the Central Bank intervened the foreign exchange market at too high cost; second, current exchange rate regime has limited the full play of the monetary policy of Central Bank; third, system design could not reflect the supply and demand situation of the market rapidly, so it will lead to the result of market failure. According to the existing problems of current exchange rate regime, policy suggestions for further reform are put forward as follows: first, continue deepening the development of foreign exchange market, and promote the completion of the RMB exchange rate forming mechanism; second, adjust the floating intervals of RMB exchange rate timely to offset the influence from external impact effectively; third, improve the foreign exchange market intervention mechanism of Central Bank; the fourth, set up exchange rate risk monitoring system; the fifth, confirm the new nominal anchor and introduce the inflation targeting; the sixth, unlock the capital supervision and regulation progressively, strengthen the control over short-term capital circulation and external debt, and guarantee the stability of the financial system.This paper includes six parts.First part explains the basic concepts of exchange rate regime, exchange rate arrangement and exchange rate regime selection theories; The second,third and forth part elaborates the background, contents and measures, and effect of the exchange rate regime reform in India,Poland and Singapore respectively. Fifth part analyzes the future tendencies of exchange rate regime of emerging market countries and regions, based on the classification and summary of the exchange rate regime selection of India, Poland and Singapore; The last part analyzes the existing problems of current exchange rate regime in China according to its contents and features, putting forward suggestions for further reform of exchange rate regime in China.