In this article we will discuss about the arguments for and against fixed exchange rates. The advocates of a fixed or pegged or stable exchange rates advance arguments to justify this system or this type of exchange rate policy. At the same time, many arguments are advanced to criticize such a policy. Arguments for Fixed Exchange Rates: The main arguments [...]
Let us make an in-depth study of the advantages and disadvantages of the fixed exchange rate system. Advantages: (i) Elimination of Uncertainty and Risk: The necessary condition for an orderly and steady growth of trade demands stability in exchange rate. Any undue fluctuations in exchange rate cause problems to the plans and programmes of both exporters and imports. In other [...]
Here we detail about the merits and demerits of fixed exchange rate system. Merits of Fixed Exchange Rate System: 1. Exchange Rate Stability: In defence of fixed exchange rate system, it has been pointed out that it ensures stability in exchange rate. Exchange rate stability, it is said, is necessary for orderly development of the international economy and rapid growth [...]