The record of central banks in developing countries was much worse even before the 1970s. Exchange-Rate Systems and Inflation Developing countries have done much worse by having central banks than they would have done by continuing their previous monetary systems or by ceasing to issue their own currencies and using the dollar, sterling, or franc instead. The reasons have to do with the relation between exchange rate systems and inflation. In theory a developing country could have a high-quality currency under any of these systems, but in practice a fixed exchange rate is the only system with a consistent record of doing the job. Free banking, monopoly issue of notes by a commercial bank, the monetary institute system, and the currency board system were all systems of fixed exchange rates.
People often confuse fixed and pegged exchange rates.
They are quite different, however, and have quite different effects. A pegged exchange rate is maintained constant for the time being in terms of the anchor currency, but carries no credible long-term guarantee of remaining at its current rate. A fixed exchange rate is preferably established by law as permanent, or at most is alterable only in emergencies. If the exchange rate is altered more than every thirty years it should be considered pegged. Many people think the Bretton Woods system was one of fixed exchange rates.