IV. THE REVISED DE FACTO CLASSIFICATION SYSTEM The revisions do not represent a fundamental overhaul of the system, but instead seek to strengthen it while maintaining continuity. In particular, the distinction between hard pegs, soft pegs, and floats, which is widely accepted in the economics profession, has been preserved. The revised definitions of the various categories are given in Appendix I Whenever consistent with observed policies and outcomes countries are classified in line with their de jure or declared exchange rate arrangements. Information on de jure arrangements is being systematically collected for the IMF membership as part of the AREAER exercise. Where the description of the de jure arrangement can be empirically confirmed over at least the previous six months, and where the de jure arrangement is the most appropriate description of the arrangement, the country is classified in the same way on a de facto basis. It is important to note that hard pegs, such as currency boards or formal dollarization, are always and only confirmed de jure arrangements, as are conventional fixed pegs, crawling pegs, and pegged exchange rates within horizontal bands(the last is a very specific de jure and de facto arrangement found mainly in recent European Union(EU) accession countries) In some countries, however, observed policies and outcomes will not be consistent with the de jure arrangement. In these cases, it is necessary to determine the appropriate de facto classification. In order to limit the potential for controversy that is inevitable in such cases the definitions and underlying criteria have been simplified and clarified. The process involves three basic steps(see also Figure 2) a distinction is first to be drawn between de facto arrangements that are floating (market-determined) and those that are not The non-floating de facto arrangements are subdivided into only two categories tabilized and crawl-like. These categories in turn are defined in terms of more easily verifiable quantitative and qualitative criteria. For many purposes of economic analysis, stabilized arrangements can be considered as peg-like The floating category is further refined by identifying a subset as free floating with classification as a free float requiring that specific quantitative and qualitative criteria are met. This change substantially reduces or eliminates the ambiguities inherent in the current distinction between independent and managed floats Any arrangement not falling into any of these categories is classified as other managed arrangement, which is the new residual categor <s By Article IV, Section 2 (a)of the IMF's Articles of Agreement, each member is required to notify the IMF of exchange arrangements it intends to apply and to notify the imf promptly of any changes in its exchange arrangements. Paragraph 16 of the 2007 Surveillance Decision emphasizes this requirement in the context of surveillance In the AREAER, countries are being asked to self-describe their exchange arrangement. Countri may also assign themselves to one of the classification categories, on a voluntary basis7 IV. THE REVISED DE FACTO CLASSIFICATION SYSTEM The revisions do not represent a fundamental overhaul of the system, but instead seek to strengthen it while maintaining continuity. In particular, the distinction between hard pegs, soft pegs, and floats, which is widely accepted in the economics profession, has been preserved. The revised definitions of the various categories are given in Appendix I. Whenever consistent with observed policies and outcomes, countries are classified in line with their de jure or declared exchange rate arrangements. Information on de jure arrangements is being systematically collected for the IMF membership as part of the AREAER exercise.3 Where the description of the de jure arrangement can be empirically confirmed over at least the previous six months, and where the de jure arrangement is the most appropriate description of the arrangement, the country is classified in the same way on a de facto basis. It is important to note that hard pegs, such as currency boards or formal dollarization, are always and only confirmed de jure arrangements, as are conventional fixed pegs, crawling pegs, and pegged exchange rates within horizontal bands (the last is a very specific de jure and de facto arrangement found mainly in recent European Union (EU) accession countries). In some countries, however, observed policies and outcomes will not be consistent with the de jure arrangement. In these cases, it is necessary to determine the appropriate de facto classification. In order to limit the potential for controversy that is inevitable in such cases, the definitions and underlying criteria have been simplified and clarified. The process involves three basic steps (see also Figure 2):  A distinction is first to be drawn between de facto arrangements that are floating (market-determined) and those that are not.  The non-floating de facto arrangements are subdivided into only two categories: stabilized and crawl-like. These categories in turn are defined in terms of more easily verifiable quantitative and qualitative criteria. For many purposes of economic analysis, stabilized arrangements can be considered as peg-like.  The floating category is further refined by identifying a subset as free floating, with classification as a free float requiring that specific quantitative and qualitative criteria are met. This change substantially reduces or eliminates the ambiguities inherent in the current distinction between independent and managed floats.  Any arrangement not falling into any of these categories is classified as other managed arrangement, which is the new residual category. 3 By Article IV, Section 2(a) of the IMF’s Articles of Agreement, each member is required to notify the IMF of the exchange arrangements it intends to apply and to notify the IMF promptly of any changes in its exchange arrangements. Paragraph 16 of the 2007 Surveillance Decision emphasizes this requirement in the context of surveillance. In the AREAER, countries are being asked to self-describe their exchange arrangement. Countries may also assign themselves to one of the classification categories, on a voluntary basis