Terence C. Mills and Geoffrey E. Woods examine what makes pegged exchange rates so attractive and consider the relationship between the exchange rate regime and a number of key macroeconomic variables, such as output, prices and interest rates, to see whether any systematic relationship exists between the behavior of these variables and the exchange rate regime. They focus their study on the United Kingdom, because the United Kingdom experienced a wide variety of exchange rate regimes over the period covered by the data, and because Britain has not endured hyperinflation or recessions as severe as those in some other countries. Their findings support the conclusion that the exchange rate regime has not been a source of volatility for the macroeconomic performance of the British economy.