The following points highlight the four main factors affecting the exchange rate. The factors are: 1. Differing Rates of Inflation 2. Capital Movements 3. Structural Changes 4. Role of Speculation. Factor # 1. Differing Rates of Inflation: True enough, the exchange rates of countries that inflate fastest will be depreciating, while the exchange rates of countries that inflate slowest will [...]
The following article will guide you to learn about how is the rate of exchange between two currencies determined. Foreign Exchange Rates: Thus exports and imports of goods between nations with different units of currency introduce a new economic factor: the foreign exchange rate, which gives the price of the foreign currency in terms of domestic currency. The two important [...]
In this article we will discuss about the advantages and disadvantages of floating exchange rates. Advantage of Floating Exchange Rates: Floating exchange rates have the following advantages: 1. Automatic Stabilisation: Any disequilibrium in the balance of payments would be automatically corrected by a change in the exchange rate. For example, if a country suffers from a deficit in the balance [...]