kursregime

Kursregime, or exchange rate regime, is the framework that a country’s authorities use to manage the value of its currency relative to others. It defines how freely the domestic currency can move, how the central bank responds to exchange rate movements, and how much monetary policy flexibility remains for domestic goals such as inflation control and employment.

Regimes are typically classified by the degree of exchange rate flexibility. Floating regimes allow the currency to move against others largely based on market supply and demand, with occasional interventions. Managed floats involve some central bank intervention to dampen excessive volatility or misalignments. Fixed regimes tie the domestic currency to another currency or a basket of currencies, through a hard peg, a currency board, or a crawling peg/target zone that adjusts gradually. Hybrid forms combine elements, such as bands or paths that guide, but do not rigidly fix, the rate.

The choice of regime reflects a balance between stabilizing the exchange rate and preserving monetary policy autonomy. Fixed and tightly managed regimes emphasize price and external stability and can bolster credibility, but they require credible commitment and substantial foreign exchange reserves. Floating regimes preserve monetary policy independence but expose the economy to exchange rate fluctuations and capital-flow shocks. Hybrid regimes aim to combine stability with some degree of policy flexibility.

Operational considerations include central bank credibility, reserve adequacy, macroeconomic policy framework, and capital controls. Regime transitions occur when fundamentals diverge from the chosen path, or when external conditions shift, potentially triggering market reassessment or speculative pressures.

Historical examples include the Bretton Woods system of fixed parities (1944–1971); Hong Kong’s currency board pegged to the US dollar; Denmark’s peg to the euro; and Singapore’s managed float within a wide band.