By and large, high capital mobility is forcing emerging market nations to choose between the two extremes of a free-floating exchange rate or a hard peg regime.

Question

Quizplus · Accepted Answer

High capital mobility creates challenges for emerging market nations in managing their exchange rates. They must either allow their currency to float freely in the market or adopt a fixed exchange rate regime, such as a hard peg, in order to maintain exchange rate stability. In some cases, countries may opt for a managed float, which falls somewhere in between these two extremes.

By and Large, High Capital Mobility Is Forcing Emerging Market