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 [...]
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 [...]
The rigidly fixed exchange rate policy and freely flexible exchange rate policy are at the two extremes. Either of the two extreme policies suffered from certain defects or problems. In practice, the different countries have attempted to adopt such exchange rate policies that tend to combine a certain degree of inflexibility with a reasonable degree of flexibility. Such policies are [...]