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National Interests: Priorities and Security
 

Benefits and threats of the floating exchange rate regime

Vol. 11, Iss. 41, NOVEMBER 2015

PDF  Article PDF Version

Received: 23 June 2015

Accepted: 7 July 2015

Available online: 10 November 2015

Subject Heading: CHALLENGES OF GLOBALIZATION AND THEIR IMPLICATIONS

JEL Classification: 

Pages: 2-12

Kabir L.S. Financial Research Institute of Ministry of Finance of Russian Federation, Moscow, Russian Federation
lkabir@nifi.ru

Yakovlev I.A. Financial Research Institute of Ministry of Finance of Russian Federation, Moscow, Russian Federation
iyakovlev@nifi.ru

Savinskii S.P. Financial Research Institute of Ministry of Finance of Russian Federation, Moscow, Russian Federation
savinskiy@nifi.ru

Nikulina S.I. Financial Research Institute of Ministry of Finance of Russian Federation, Moscow, Russian Federation
snikulina@nifi.ru

Rakov I.D. Financial Research Institute of Ministry of Finance of Russian Federation, Moscow, Russian Federation
rakov@nifi.ru

Importance The research examines financial globalization as reflected in the emerging economies' experience of currency liberalization (Brazil, India, China, South Africa).
     Objectives The research structures the main components of the policy and practice the countries implemented for currency liberalization in terms of consistency of measures undertaken.
     Methods Using general research methods, this article considers various aspects of currency liberalization policies, identifies trends specific to the state-of-the-art and development of the policy and its main directions.
     Results In the above countries, currency liberalization was run concurrently with reforms arising from the crisis of the balance of payments and financial crisis, or concurrently with large socio-economic reforms for creating a socialist market economy, being ingrained in the reforming process. As seen in the above countries, it becomes possible to switch to a flexible exchange rate after macroeconomic conditions are created, thereby making the use of the flexible exchange rate reasonable and effective. It allows identifying the following factors ensuring a favorable result: the currency liberalization policy should be consistent with national priorities; preparedness of the national economic structure and the development of institutions and infrastructure of financial markets should determine liberalization pace.
     Conclusions and Relevance If currency liberalization is studied as a process on the basis of foreign experience, with periods and measures identified, it will allow finding national specifics of regulating cash flows and foreign exchange rate, and provide an understanding of factors that ensure favorable results of liberalization.

Keywords: currency policy, exchange rate, capital flow liberalization, national financial system, financial security, economic security

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