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Exchange rate regimes, author Ben Carliner argues, are determined by three main factors:
First, policy makers are faced with the structural constraints imposed by the so-called trilemma - the inability to maintain the combination of a fixed exchange rate, free capital mobility, and a monetary policy oriented toward domestic needs.
Second, the continuing growth of deep, liquid financial markets and institutions, along with rising international trade and investment, has made international capital flows increasingly hard to regulate. Given the constraints imposed by the trilemma, the difficulties in imposing and maintaining capital controls further limit the range of policy options available to governments.