Exchange Rate Arrangements

(II-1) Exchange RateArrangements

(

asof Jan. 1, 1999)

	Description of Arrangement	Anchor, etc.	Major countries	Number of Countries
Peg : Single Currency	A domestic currency is pegged to a major currencywith infrequent adjustment of the parity.	U.S. dollar	Argentina, Malaysia, Hong Kong SAR, Bahamas,Barbados, Iraq, Lithuania, Oman, Panama, etc.	23
		(Euro area)	Austria, Belgium, Finland, France, Germany,Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain	11
		Euro	San Marino, Cape Verde	2
		French franc (CFA franc zone)	Cameroon, Congo, Cote d'Ivoire, etc.	15
		Deutsche mark	Bulgaria, Estonia, Bosnia and Herzegovina	3
		Others	South African rand : Lesotho, Namibia, Swaziland,Indian rupee : Nepal, Bhutan, Singapore dollar : Brunei Darussalam,Australian dollar : Kiribati	7
Peg : Currency Composite	A domestic currency is pegged to a weightedcurrency composite formed from the currencies of major trading or financialpartners. Currency weights in the composites are country-specific and reflectthe geographical distribution of trading and financial transactions. There arealso standardized currency baskets such as SDR and ECU.	SDR (Euro, Japanese yen, Pound Sterling, U.S. dollar)	Myanmar, Jordan, Latvia, Libyan Arab Jamahiriya	4
Peg : Currency Composite		Other currency composites	Bangladesh, Botswana, Burundi, Cyprus, Fiji(Australian dollar, Japanese yen, NZ dollar, Pound Sterling, U.S. dollar),Iceland (Euro, Canadian dollar, Japanese yen, Norwegian krone, Pound sterling,Swedish krone, Swiss franc, U.S. dollar), Kuwait, Marta (Pound sterling, U.S.dollar, ECU), Morocco, Samoa, Seychelles, Tonga, Vanuatu	13
Flexibility Limited vis-a-vis Single Currency	The value of the currency is maintained withincertain margins of fluctuation around the de facto peg to a single currency.	SDR	Saudi Arabia, United Arab Emirates, Bahrain,Qatar	4
Flexibility Limited : Cooperative Arrangements	Exchange rates are fixed against currenciesinside a specific area, while floating against those outside the area.	ERM2	Greece, Denmark	2
Managed Float	The central bank quotes and supports the exchangerate but varies it frequently. Indicators for adjusting the rate includes thebalance of payments position, international reserves. Some countries adopt themanaged float based on certain currency composite.		China, Singapore, Chile (U.S. dollar, Deutschemark, Japanese yen), Venezuela, Czech Republic, Hungary (Euro, U.S. dollar),Poland, Russia, Israel (Deutsche mark, French franc, Japanese yen, Poundsterling, U.S. dollar), etc.	54
Independent Float	Rates are market-determined, with anyintervention aimed at moderating rate of change, rather than at setting a levelfor the rate.		Thailand, Indonesia, Korea, Philippines, Brazil,Peru, India, Mexico, South Africa, Japan, United States, United Kingdom,Australia, Canada, Switzerland, Sweden, etc.	47

(Note) Currencies in the parentheses of "Major countries" indicatethe composition of currency baskets.
(Sources) Documents of International Monetary Fund

(II-2) Chronology ofEuropean Monetary Union, etc

	European Monetary Union	EC and Market Unification in Europe	International Monetary System, etc.
1944			Jun.Conference in Bretton Woods. Dec.Agreement of IMF comes into effect.
1952		Jul.ECDC (European Coal and Steel Community)established.
1958		Jan.EEC (European Economic Community) and EURATOM(European Atomic Community) established.
1967		Jun.EC (European Community) established, intowhich ECSC, EEC and EURATOM are integrated.
1968		End-Aug.Tariff union completed. (Internal tariffabolished. Common external tariff adopted.) Common agricultural policy completed (setting and supporting common price).
1969	Dec.Summit meeting in Hague.(Agreement oneconomic and monetary unification and the enlargement of EC)
1970	Oct."WernerReport," a first report on the economic and monetary union, published. · Reduction of margins of fluctuation in exchange rateamong menders to zero in ten years · Liberation of capital movements and unification offinancial markets
1971			Aug.Nixon Shock Dec.Smithsonian agreements
1972	Apr.Basel Agreement (the creation of"snake" limiting fluctuation margins among EC menders' currencieswithin 1.125% on either side, narrower than in Smithsonian Agreement.)
1973	Mar.Transition to "joint float," inwhich members' currencies fluctuate within a certain band while floating againstU.S. dollar. Apr.EMCF, an organization for monetary cooperation among EC members until theestlablishment of ECB, was set up in order to centralize and settle assets andliabilities between EC members. BIS established as the administrative agency.	Jan.United Kingdom, Ireland and Denmark join EC.	Main countries' foreign exchange ratestransferred to floating. First oil shock
1974			Jun.The Committee of Twenty, IMF, adopts a finalreport, "International Monetary Reform".
1978	Dec.Resolution to create EMS adopted at EC summitmeeting.
1979	Mar. EMS inaugurated. (Germany, France, Benelux, Italy, and Denmark) · Setting parity between countries, which are obliged tointervene to maintain it. (ERM) · ECU (European currency unit: currency unit based on the basket system)introduced.		Second oil shock
1981		Jan.Greece joins EC.
1985		Jun."A Genuine Common Market by 1992"published, enumerating obstacles to be eliminated to realize the integration ofinternal economies by the end of 1992.	Sep.Plaza Agreement
1986		Jan.Spain and Portugal join EC.
1987		Jul."Single European Act" comes intoforce. (Completion of integration of internal markets by the end of 1992, andintroduction of limited majority rule)	Feb.Louvre Agreement
1989	Apr."Delors report" published, thethird scheme for monetary union, following "Welner report" and EMS.Three-stage plan for EMU proposed .
1990	Jul.Stage One for EMU (strengthening of policycoordination) starts. Oct.UK joins ERM (Exchange Rate Mechanism under EMS).	Oct.Unification of Germany.
1991		Dec.Maastricht European Council reaches agreementon Treaty on European Union draft.
1992	Sep.First European currency crisis (UK and Italysecede from ERM)	Feb.Treaty on European Union, Maastricht Treaty,signed.
1993	Aug.Second European currency crisis (band of ERMwidened)	Nov.Treaty on European Union comes into force.
1994	Jan.Stage Two for EMU starts. EMI(European Monetary Institute)established.	Jan.EEA (European Economic Area) established.	Dec.Mexican crisis occurs.
1995	Dec.The European Council in Madrid adopts EMIreport, "The Changeover to the Single Currency," deciding to name asingle currency, the euro. The timetable for transition to the single currency is proposed. Coexistence ofthe single currency and each country's currency approved.	Jan.Sweden, Austria and Finland join EU.
1996	Nov.Italy re-enters ERM.
1997		Jun.Amsterdam European Counciladopts resolutions on the Stability and Growth Pact and on ERM II. Oct.Amsterdam Treaty signed.	Jul.Asian currency crisis occurs in Thailand.
1998	Mar.The first group of countries to participatein the single currency is decided. (Belgium, Germany, Spain, France, Ireland,Italy, Luxembourg, Netherlands, Austria, Portugal and Finland - 11countries)Irrevocable conversion rates among members adopting the singlecurrency announced. Jun.European Central Bank (ECB) established.
1999	Jan.Stage three for EMUstarts. Euro introduced for non-cash transactions, coexisting with each country'currency. The irrevocable conversion rate for the euro for each participating currency isdetermined. Monetary policy conducted by ECB. ERM II comes into force, and Denmark and Greece join.
<Schedule> 2002	Jan.Euro notes and coins begin to circulate. Notes and coins of countries participating in the euro begin to be withdrawn, tobe completed by the end of July 2002 at the latest.. Jul.National notes and coins cease to be legal tender, and the euro begins tocirculate as the only legal tender.

(II-3) Chronology ofEvents on International Monetary System

Year	Event
	Establishment of International Gold Standard System Centered on Pound Sterling
1816	Gold parity legalized in United Kingdom. (1 ounce of gold = 3pounds, 17 shillings, 10.5 pence, which had been applied de facto since 1717.)
1844	Amount of banknotes issued by Bank of England limited. (Peel'sBank Act) The gold standard system spreads to other countries: Germany (1873),France(1876),United States(1879),Japan and Russia(1897)
1914	Outbreak of World War I Cessation of International Gold Standard System
	Return to International Gold Standard System (internationalgold exchange standard system)
1919	United States returns to the gold standard system.
1922	International monetary finance conference in Genoa : liquid assets except goldpermitted to be held as reserves.
1925	United Kingdom returns to the gold standard system in oldparity.
1928	France adopts the gold standard system. Other countries also return to the gold standard system. (Japanreturns in 1930.) However, most countries return in the form of gold exchange standard: using thecurrency of a country adopting gold as its international currency or adoptingthe gold standard.
	Collapse of International Gold Standard System (international gold exchange standard system)
1931	United Kingdom ceases the gold standard system. Around the sametime, the gold standard is dropped by 35 countries. (Mostcountries' exchange rates stabilized against pound sterling while floatingagainst the US dollar and French franc: areas of the former British Empire,Scandinavian countries, Portugal, and Egypt, etc.)
1933	United States halts conversion to gold. (in1934, gold parity devalued: 1 ounce = 35 dollars)
1936	Gold standard dropped by France and other gold block countries(Italy, Belgium, Netherlands, Switzerland, etc.) Competition in devaluation of exchange rate.
1939	World War II
	Establishment of Bretton Woods System
1944	Bretton Woods Conference: IMF and World Bank Articles ofAgreement formulated. (coming into force in Dec. 1945)
1947	IMF begins operations: gold-dollar standard system (US dollarlinked to gold parity and adopted as key currency. Other currencies obliged tomaintain exchange parity pegged to US dollar - fluctuation band within 1%)
	Breakdown of Bretton Woods System (transfer to floating exchange rate)
1971	Nixon Shock Smithsonian agreements (USdollar standard system, 1 US dollar =308yen)
1973	Yen transferred to floating exchange rate system. (Europe)EC countries introduce joint float.
1976	Agreement on Second Amendment of Articles of Agreement of IMF,coming into force in April 1978 (approval of floating exchange rate system). (Europe)1979EMS inaugurated.
1985	Plaza Agreement
1987	Louvre Agreement (Europe)1991Maastricht Treaty signed. 1999 Stagethree for EMU starts (introducing the euro).

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