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An international financial arrangement, the float exchange rate system, central banks intervene periodically to support a countryÃ?s currency and stabilize any volatile fluctuations in the foreign exchange rates. The advantages of this are that the float attempts to combine both the fixed and flexible exchange rate systems, depending on the instability. Less instability, less intervention is needed; grater instability more is needed by the central banks and less freedom to pursue independent domestic monetary policies because of the frequent uses their money supplies to calm disturbed foreign exchange markets. One of the biggest disadvantages of a managed float is determining the timing and amount of the instability and the necessary intervention.

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What are the advantages of exchange rate?

The advantages of floating exchange rates are: Flexibility and automatic adjustment, Flexibility in determining interest rates, Greater insulation from other countriesâ?? economic problems, Lower foreign exchange reserves.


If the supply and demand for currency determines the exchange rates this is called?

floating


What are the advantages of a fixed exchange rate system compared to a floating exchange rate system?

In a fixed exchange rate system, the advantages include stability in international trade and investment, reduced uncertainty for businesses, and lower inflation rates. This system can also help countries maintain control over their currency value and prevent sudden fluctuations.


Explain using economic models how an exchange rate is determined under a floating exchange rate regime What are the factors that can cause an appreciation in exchange rates Malaysia has recently cha?

Exchange rates are determined through supply and demand. An increase in interest rates can appreciate an exchange rate as investors convert their money into that currency to take advantage of a higher return on their money.


Describe How does exchange rates get set?

Exchange rates are set through a combination of market forces and government interventions. In a floating exchange rate system, rates fluctuate based on supply and demand for currencies in the foreign exchange market, influenced by factors such as interest rates, inflation, and economic stability. Conversely, in a fixed exchange rate system, governments peg their currency to another major currency, adjusting their monetary policy to maintain that rate. Additionally, central banks may intervene by buying or selling currencies to stabilize or influence their exchange rates.

Related Questions

What are the advantages of exchange rate?

The advantages of floating exchange rates are: Flexibility and automatic adjustment, Flexibility in determining interest rates, Greater insulation from other countriesâ?? economic problems, Lower foreign exchange reserves.


Features of floating exchange rate?

In a floating exchange rate system, the rates keep on changing according to the economic conditions. The rates of the currencies are never fixed.


If the supply and demand for currency determines the exchange rates this is called?

floating


What are the advantages of a fixed exchange rate system compared to a floating exchange rate system?

In a fixed exchange rate system, the advantages include stability in international trade and investment, reduced uncertainty for businesses, and lower inflation rates. This system can also help countries maintain control over their currency value and prevent sudden fluctuations.


How was the world economy after Bretton Woods'agreement?

They tried to immediately find a new set of exchange rates after Bretton Woods failed- it didn't relieve it much. They used a free-floating regime which is a very mixed bag of floating and fixed exchange rates.


What has the author Ronald MacDonald written?

Ronald MacDonald has written: 'Gambier's Advocate' 'The sea maid' 'The macroeconomic impact of government budget deficits' 'Floating exchange rates' -- subject(s): Foreign exchange 'International parity conditions' 'Our experience with floating exchange rates' 'The sword of the King' 'Cointegration and the consumption function' 'From a northern window' -- subject(s): Scottish Authors, Biography 'International Money and Finance' 'What do we really know about real exchange rates?' -- subject(s): Foreign exchange rates 'A Human Trinity'


Explain using economic models how an exchange rate is determined under a floating exchange rate regime What are the factors that can cause an appreciation in exchange rates Malaysia has recently cha?

Exchange rates are determined through supply and demand. An increase in interest rates can appreciate an exchange rate as investors convert their money into that currency to take advantage of a higher return on their money.


Describe How does exchange rates get set?

Exchange rates are set through a combination of market forces and government interventions. In a floating exchange rate system, rates fluctuate based on supply and demand for currencies in the foreign exchange market, influenced by factors such as interest rates, inflation, and economic stability. Conversely, in a fixed exchange rate system, governments peg their currency to another major currency, adjusting their monetary policy to maintain that rate. Additionally, central banks may intervene by buying or selling currencies to stabilize or influence their exchange rates.


What has the author Amartya Lahiri written?

Amartya Lahiri has written: 'Delaying the inevitable' -- subject(s): Balance of payments, Interest rates, Monetary policy 'Segmented asset markets and optimal exchange rate regimes' -- subject(s): Econometric models, Foreign exchange rates, Prices 'Living with the fear of floating' -- subject(s): Econometric models, Foreign exchange rates, Interest rates, Monetary policy


Why a cut in government spending has a larger effect under a fixed exchange rate system and perfect capital mobility than in a closed economy?

fixed and floating exchange rates


What is 240 hong kong worth in NZ dollars?

Since NZ has a floating currency, the best place for this question is in the exchange rates in the newspaper, or an enquiry at a bank.


What are foreign exchange rates?

Foreign exchange rates are currency exchange value of other countries.