The Exchange Rate Regime: A Mechanism for Preventing Business Difficulties

Abstract

The choice of an exchange rate regime presents a challenge for monetary authorities as it forms the basis of decisions to be made in terms of the financial behaviors of states in the medium to long term and the governance measures to be taken to assess the performance of companies contributing to the development of national economies. Therefore, the adoption of an appropriate exchange rate regime that determines the rules of monetary authorities' intervention in the foreign exchange market and consequently determines the behavior of the exchange rate is of crucial importance. The immediate impact of this rate on several economic indicators is clear, including international trade, capital movements, and therefore an important factor for a country's economic performance. The choice of the exchange rate regime involves a number of key economic policy decisions that directly affect economic performance but may limit action in other areas of economic policy. This choice is an important decision faced by authorities or decision-makers of all countries, which can affect its economic well-being in the short or long term. The objective of this article is to determine the relationship between the exchange rate regime and the business environment, and to show that there are other alternatives, such as the choice of an appropriate exchange rate regime, to protect companies operating in international trade. The investigative strategy adopted in this article is a qualitative exploratory research design that aims to describe, interpret, and analyze complex social phenomena.

By referring to the traditional literature, we can provide important context for our current study by showing the evolution of ideas and knowledge in the field. Additionally, by examining how previous researchers have approached the same problems and questions.

Keywords: Exchange rate regime, prevention mechanism, companies.

JEL Classification: G18, G28, G32 and G38

Paper type : Empirical Research