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 [...]
In this article we will discuss about fixed or pegged and flexible or fluctuating exchange rate system. Fixed or Pegged Exchange Rate System: In the case of fixed or pegged exchange system, all the international transactions take place at the rate of exchange fixed by the monetary authority. The exchange rate is either fixed by the government through legislation or [...]
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 [...]