The following procedure is observed in India for the determination of Exchange Rate:- In theory terms exchange rate determination is explained by two main models: 1. Flexible/floating exchange rate model 2. Fixed/pegged exchange model 1. Flexible Exchange Rate Model: When we treat exchange as a price of any foreign currency, then we can use the tools of demand and supply [...]
The debate concerning the fixed versus flexible exchange rates is not complete unless the arguments that the economists have advanced in support of and against the system of flexible or fluctuating rates of exchange are considered. Arguments for Flexible Exchange Rates: The main arguments in favour of the flexible exchange rates are as below: (i) Simple Mechanism: The system of [...]
In this article we will discuss about the merits and demerits of multiple exchange rates. Immediately after the Second World War, almost 50 countries of the world were having a complex system of multiple exchange rates. The prominent among them were West Germany, Argentina and a number of Latin American countries. By 1950's, the system was completely abandoned because of [...]