Determining Exchange Rate Regime After Intervention

As a part of its monetary policy framework, Country X operates a floating exchange rate regime. This means that the exchange rate is determined by market forces, and the government or central bank does not intervene to stabilize or influence the currency's value. Recently, Country X has experienced significant volatility in its currency value due to fluctuating commodity prices, which are a major export for the country.

An advisory report indicates that, should the central bank decide to intervene in the currency market to stabilize its currency, it might lead to a more controlled exchange rate regime. However, such intervention can have repercussions on economic growth and inflation.

What type of exchange rate regime would Country X effectively shift to if it decided to regularly intervene in the currency markets to stabilize its value?