The Choice Between Flexible Exchange Rates, Capital Control and the Currency Board in Asian Countries: A Perspective from the "Impossible Trinity"

We attempt to compare adjustment costs under exchange rate regimes in East Asian economies during their recovery processes. The criteria are the degree of overshooting in exchange rates, the changes in country risks, and the severity and duration of the recovery processes. Linear ranking is difficult. Managed rates with capital control worked for macroeconomic performance despite the welfare loss due to blocking capital flows. The currency board system worked well for stability, but recent experiences of Argentina and Hong Kong were deflationary. Under flexible rates, many economies that received IMF grants suffered a drastic initial downturn but later recovered vigorously. JEL Classification Numbers: F31, F32, F33.