I. Introduction As a originate of...

I. Introduction

As a originate of awarding the 1999 Nobel Prize for Economics to Robert Mundell single of his major contributions, the Mundell-Fleming gauge has become a focus of attention. Because of the expansion in international trade and the globalization of international finance, many developing and transitional economies in the world are facing the riddle of choosing an appropriate exchange rate regime. In light of the improvement in international capital mobility, many small countries are choosing a pegg (fixed) exchange rate arrangement As pointed out in Mundell (1963) and Fleming (1962) when a small political division tries to maintain a fixed