This text investigates the determinants of exchange rates and evaluates the main options for policy-makers in limiting exchange rate fluctuations. It draws on the empirical evidence of the experiences of the G7 countries over the last two decades to conclude that co-ordination of monetary policies is the best way to manage exchange rates. Foreign exchange intervention in markets appears to be effective within currency blocs like the European Monetary System but not on the major exchange rates. It argues that capital/foreign exchange controls become ineffective in the long term and are not...