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 Fixed Exchange Rates

 

Definition of a Fixed Exchange Rate: This occurs when the government seeks to keep the value of a currency fixed against another currency. e.g. the value of the Pound is fixed at £1 = €1.1

Semi Fixed Exchange Rate. This occurs when the government seeks to keep the value of a currency between a band of exchange rate. In other words, the exchange rate can fluctuate within a narrow band.

E.g. the Pound Sterling could fluctuate between a target exchange rate of £1 = €1.1 and £1 = €1.2

Definition of a Floating Exchange Rate: this is when the govt does not intervene in the foreign exchange market but allowss market forces to determine the level of a currency.

· Exchange Rate Mechanism ERM. This was a semi fixed exchange rate where EU countries sought to keep their currencies fixed within certain bands against the D-Mark. The ERM was the forerunner of the Euro

• Advantages and Disadvantages of Fixed Exchange Rates

See also:

• Benefits of the Euro
• Costs of the Euro

Essays and Revision Notes on Exchange Rates

• Exchange Rates revision notes and essays
• Factors influencing exchange rates
• Determination of exchange rates in free markets
• Effects of Appreciation
• Effects of Depreciation
• Government Int
• Fixed Exchange Rates
• International Trade Revision Notes
• Globalisation Essays

Exchange Rate Essays

• Effects of a falling Dollar
• Why Dollar keeps falling
• Discuss Policies to Stop the Dollar Falling
• Does Devaluation Cause Inflation?

 

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