The criteria of the theory of optimum currency areas suggest that many (most?) countries are not good candidates for either of the poles of genuinely fixed exchange rates or freely floating exchange rates. Thus many countries should have an interest in intermediate exchange rate regimes....

This paper argues that while sources of potential discipline over domestic macro economic policies such as pegged exchange rates, high capital mobility, and IMF policy conditionality are commonly viewed as constraints, it is usually more productive to view them as influencing incentive...