Punch in the historical exchange rate for the US dollar against the Malaysian Ringgit, and go back two years.

Notice that the peg remains quite stable, hardly changing from 3.801 to the US dollar, right up until about March 27 2003, when it starts to fluctuate through a wider band between 3.79 and 3.82 to the US dollar. The Chinese yuan renminbi exhibits this behavior as well, where the exchange rate is officially fixed, but in practice is allowed to swing through a band.

Widening a band is usually a prelude to floating an exchange rate, as the Israeli government has done to the shekel, allowing it to go from a 5% band to a 42% band, and I think the band has increased even further in size.

The fixed exchange rate to the US dollar was one of Mahathir Mohammed's economic recovery planks, coupled with stringent exchange controls in order to prevent disruptive capital flows from impeding the economic recovery.

The political battles in Malaysia have partly been fought over whose economic vision should prevail. Mahathir's popular pro-Western deputy PM Anwar Ibrahim, for example, was jailed on trumped-up charges, in part, because he was seen as a threat to Mahathir's unorthodox ("unorthodox" by Washington Consensus standards, but acceptable to old-guard Keynesians ) methods of getting out from under the cloud of the Asian crisis in 1998.

In particular the fixed exchange rate seems to be less closely adhered to after October 31 2003, when Mahathir Mohammed officially left office.

This topic is somewhat important, I feel, because the economic program followed by Malaysia is proof positive that slavishly following the IMF dictates is not the only route to success, and indeed not the only pathway to recovery from economic ills. Malaysia's recession was shallower and its recovery sharper than neighboring Indonesia's, which accepted all the dictates of the International Monetary Fund and got bogged down in a sluggish economic recovery.