II. NEED FOR CHANGE As noted, two key motivations for change were the overly heterogeneous nature of the residual category of managed floating(Figure 1)and more complex intervention practices Figure 1. Development of the Residual Category, 1975-2008/2/ (In percent of classified countries; quarterly data 1977 taxon 1975 taxonomy Source: areaer database 1/ For the 1975 taxonomy, Independently floating, for the 1977 taxonomy, Other; for the 1982 taxonomy, Other managed floating, and for the 1997 taxonomy," Managed floating with no predetermined path for the exchange rate 2/End-April 2008 As the number of countries more actively managing their exchange rate has again increased in recent years, many have resisted a reclassification as managed floats or fixed pegs. This has posed significant operational problems the distinction between independent floating and managed floating under the existing classification system relied too heavily on judgment; and many countries have objected to a change in classification from a managed float to a fixed peg, arguing that they have no commitment to defending a particular level of he exchange rate As to intervention practices, a growing number of countries are now able to switch betwee domestic and foreign currency debt on commercial terms, while others have had income particular from oil, that may or may not be channeled through the central bank, and have been building pools of reserve-like assets in the form of oil stabilization funds or longer-term investment funds. As a result, conventional measures of intervention may understate the degree to which floating exchange rates in some countries are managed. The problems are compounded by the lack of availability of data on foreign exchange Intervention6 III. NEED FOR CHANGE As noted, two key motivations for change were the overly heterogeneous nature of the residual category of managed floating (Figure 1) and more complex intervention practices. Figure 1. Development of the Residual Category, 1975–2008 1/ 2/ (In percent of classified countries; quarterly data) 1975 taxonomy 1977 taxonomy 1982 taxonomy 1998 taxonomy 0 5 10 15 20 25 30 35 1975 1979 1983 1987 1991 1995 1999 2003 2007 0 5 10 15 20 25 30 35 Source: AREAER database. 1/ For the 1975 taxonomy, “Independently floating;” for the 1977 taxonomy, “Other;” for the 1982 taxonomy, “Other managed floating;” and for the 1997 taxonomy, “Managed floating with no predetermined path for the exchange rate.” 2/ End-April 2008. As the number of countries more actively managing their exchange rate has again increased in recent years, many have resisted a reclassification as managed floats or fixed pegs. This has posed significant operational problems:  the distinction between independent floating and managed floating under the existing classification system relied too heavily on judgment; and  many countries have objected to a change in classification from a managed float to a fixed peg, arguing that they have no commitment to defending a particular level of the exchange rate. As to intervention practices, a growing number of countries are now able to switch between domestic and foreign currency debt on commercial terms, while others have had income flows, in particular from oil, that may or may not be channeled through the central bank, and have been building pools of reserve-like assets in the form of oil stabilization funds or longer-term investment funds. As a result, conventional measures of intervention may understate the degree to which floating exchange rates in some countries are managed. The problems are compounded by the lack of availability of data on foreign exchange intervention