By and large, high capital mobility is forcing emerging market nations to choose between the two extremes of a free floating regime or an exchange rate regime of dollarization of a currency board.

Question

Quizplus · Accepted Answer

High capital mobility makes it difficult for emerging market nations to maintain a fixed exchange rate regime, as capital flows can quickly destabilize the currency's value. As a result, many countries either adopt a free-floating exchange rate regime or choose to peg their currencies to the US dollar through dollarization or a currency board.

By and Large, High Capital Mobility Is Forcing Emerging Market