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Topic: Fixed exchange rate

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Floating exchange rate

Exchange rate regime

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	NationMaster - Encyclopedia: Floating exchange rate
		A fixed exchange rate, sometimes (less commonly) called a pegged exchange rate, is a type of exchange rate regime wherein a currencys value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold.
		The opposite of a floating exchange rate is a fixed exchange rate.
		To the extent that the exchange rate is determined by the trade balance, the exchange rate is counter-cyclical as the latter.
	www.nationmaster.com /encyclopedia/Floating-exchange-rate (1014 words)

	Exchange rate - Facts, Information, and Encyclopedia Reference article
		For example an exchange rate of 120 Japanese yen (JPY, ¥) to the United States dollar (USD, $) means that JPY 120 is worth the same as USD 1.
		Exchange rates for such currencies are likely to change almost constantly as quoted on financial markets, mainly by banks, around the world.
		The nominal exchange rate is the rate at which an organisation can trade the currency of one country for the currency of another.
	www.startsurfing.com /encyclopedia/e/x/c/Exchange_rate.html (939 words)

	Exchange Rate Regimes as Inflation Anchors - Finance & Development - March 1996
		For example, the average variability of industrial countries' exchange rates increased sharply with the pound sterling's devaluation and associated adjustments in 1967, but average inflation was rising before that date--from about 2 percent in the early 1960s to 3 percent by the mid-1960s.
		The success of fixed exchange rate regimes in countries with low inflation at the time of devaluation suggests that such regimes may be useful at a later stage of stabilization, after inflation has been reduced to broadly satisfactory levels.
		Egypt initially switched to a floating arrangement and unified the exchange rate in 1991; a considerable market-based rate adjustment thus preceded the subsequent period of exchange rate stability.
	www.worldbank.org /fandd/english/0396/articles/0140396.htm (3379 words)

	Exchange rate - Wikipedia, the free encyclopedia
		In finance, the exchange rate (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other.
		The nominal exchange rate is the rate at which an organization can trade the currency of one country for the currency of another.
		The real exchange rate is defined as rer=e(P/P) where e is the exchange* rate as number of foreign currency units per home currency unit and P is the price level of the home country and P* the foreign price level.
	en.wikipedia.org /wiki/Exchange_rate (1197 words)

	Fixed Exchange Rates
		Exchange rates are often "fixed" that they are only allowed to fluctuate around a particular band.
		When the fixed exchange rate leads to an excess demand for the domestic currency, then the problem is solved by mopping up the excess demand using more domestic currency.
		However, when the fixed exchange rate leads to an excess supply of the domestic currency, then the problem can only be solved by spending reserves of foreign currency in order to mop up the excess supply of the domestic currency.
	academics.vmi.edu /econ_ab/notes16.htm (763 words)

	News \| TimesDaily.com \| TimesDaily \| Florence, Alabama (AL)
		A currency that uses a fixed exchange rate is known as a fixed currency.
		For example, the Asian financial crisis was ameliorated by the fixed exchange rate of the Chinese renminbi, and the IMF and the World Bank now acknowledge that Malaysia's adoption of a peg to the US dollar in the aftermath of the same crisis was highly successful.
		The main criticism of fixed exchange rate is that flexible exchange rates serve to automatically adjust the balance of trade.
	www.timesdaily.com /apps/pbcs.dll/section?category=NEWS&template=wiki&text=fixed_exchange_rate (736 words)

	FRBSF: Economic Letter - A Currency Board for Indonesia? (3/20/98) (Site not responding. Last check: 2007-09-17)
		Because it is a pegged exchange rate regime, a currency board precludes a number of activities commonly associated with central banking.
		If the exchange rate peg is set at a slightly undervalued level, there will be little incentive for speculators to attack the board, and in that case, partial backing may succeed.
		This is true because policy concerns arise with both pegging the exchange rate and choosing the dollar as the currency to which it pegs.
	www.frbsf.org /econrsrch/wklyltr/wklyltr98/el98-09.html (1804 words)

	Spartanburg SC \| GoUpstate.com \| Spartanburg Herald-Journal (Site not responding. Last check: 2007-09-17)
		In common modern usage, it specifically implies an official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency.
		These fixed rates are usually maintained by a combination of legally enforced capital controls or through government trading of foreign currency reserves to manipulate the money supply.
		Under fixed exchange rates, persistent capital outflows or trade deficits may lead countries to lower or abandon their fixed rate policy, resulting in a devaluation (as persistent surpluses and capital inflows may lead them towards revaluation).
	www.goupstate.com /apps/pbcs.dll/section?category=NEWS&template=wiki&text=devaluation (792 words)

	Tutor2u - fixed and floating exchange rates
		In a fixed exchange rate system, the government (or the central bank acting on the government's behalf) intervenes in the currency market so that the exchange rate stays close to an exchange rate target.
		Fixed rates provide greater certainty for exporters and importers and under normally circumstances there is less speculative activity - although this depends on whether the dealers in the foreign exchange markets regard a given fixed exchange rate as appropriate and credible.
		Fixed exchange rates can exert a strong discipline on domestic firms and employees to keep their costs under control in order to remain competitive in international markets.
	www.tutor2u.net /economics/content/topics/exchangerates/fixed_floating.htm (1461 words)

	Currency Devaluation and Revaluation - Fedpoints - Federal Reserve Bank of New York
		Under a fixed exchange rate system, devaluation and revaluation are official changes in the value of a country's currency relative to other currencies.
		Devaluation, the deliberate downward adjustment in the official exchange rate, reduces the currency's value; in contrast, a revaluation is an upward change in the currency's value.
		In order to sustain a fixed exchange rate, a country must have sufficient foreign exchange reserves, often dollars, and be willing to spend them, to purchase all offers of its currency at the established exchange rate.
	www.newyorkfed.org /aboutthefed/fedpoint/fed38.html (969 words)

	Finance: Chapter 80-6: Interest Rate Parity with Fixed Exchange Rates
		One of the main differences between a fixed exchange rate system and a floating system is that under fixed exchange rates the central bank will have to “do something” periodically.
		Recall, that the AA-DD model assumes the exchange rate is determined as a result of investor incentives to maximize their rate of return on investments.
		If these same investors were operating in a fixed exchange rate system, however, and if they believed that the fixed exchange rate would indeed remain fixed, then the investor’s expected exchange rate should be set equal to the current fixed spot exchange rate.
	www.internationalecon.com /Finance/Fch80/F80-6.php (610 words)

	Exchange Rate Primer
		An exchange rate is the rate of exchange between two currencies.
		Fixed exchange rate: the exchange rate is set by the central bank.
		Temporarily fixed rates (or bandwiths) that are subject to realignment either occasionally (e.g., in the EMS) or continuously (e.g., Brazil) to adjust for differences in inflation.
	pacific.commerce.ubc.ca /keith/Lectures/exr.html (1623 words)

	Chapter 23 FLOATING EXCHANGE RATE AND INTERNAL BALANCE
		With floating exchange rates the effect of a change in fiscal policy depends on how responsive international capital flows are to changes in interest rates.
		The exchange rate on the lira is fixed with unsterilized intervention.
		The exchange rate on the lira is fixed with sterilized intervention.
	www.wright.edu /~tdung/Chapter23_Pugel.htm (2486 words)

	Finance: Chapter 80-1: Fixed Exchange Rate Systems
		Under a floating exchange rate system, the value of a country’s currency is determined by the supply and demand for that currency in exchange for another in a private market operated by major international banks.
		In contrast, in a fixed exchange rate system a country’s government announces, or decrees, what its currency will be worth in terms of “something else” and also sets up the “rules of exchange.
		A second key advantage is the discipline a fixed exchange rate system imposes on a country’s monetary authority, likely to result in a much lower inflation rate.
	internationalecon.com /Finance/Fch80/F80-1.php (266 words)

	Fixed exchange rate - Definition from Investor Dictionary - Define meaning of the word Fixed exchange rate
		A fixed exchange rate, sometimes (less commonly) called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency (most often the US Dollar), to a basket of other currencies, or to another measure of value, such as gold.
		A currency that uses a fixed exchange rate is known as a fixed currency.
		The opposite of a fixed exchange rate is a floating exchange rate.
	www.investordictionary.com /definition/fixed+exchange+rate.aspx (248 words)

	Fixed Exchange Rates [ Biz/ed Virtual Developing Country ]
		With a fixed exchange rate system the government, often acting through its agent the Central Bank, fixes or pegs the value of the currency to another currency such as the US dollar.
		However the impact of an overvalued exchange rate on the balance of payments should be considered.
		The IMF usually requires those countries seeking assistance to either allow their currency to depreciate if it is floating exchange rate or to devalued it if it is a fixed exchange rate.
	www.bized.co.uk /virtual/dc/trade/theory/th9.htm (559 words)

	EXCHANGE RATE
		The freely floating exchange rates are determined by the forces of demand and supply.
		In addition, flexible exchange rates allow policy makers to be flexible in conducting domestic monetary and fiscal policies.
		The current system is a managed floating exchange rate system in which governments attempt to prevent rates from changing too rapidly in the short term.
	staffwww.fullcoll.edu /fchan/macro/5exchange_rate.htm (403 words)

	Celebrating Ten Years of Fixed Exchange Rates in Jordan - Zawya.com \| Middle East Business News
		For the past ten years exchange rate stability prevailed and no major event of speculative pressure on the dinar was recorded.
		As for imports, exchange rate uncertainty associated with the flotation of the currency is more disruptive to importers than higher import prices.
		The oldest theory for doing this is the purchasing power parity, which says that is the long run, the exchange rates of two currencies should equalize the prices of a tradable basket of goods and services in the two countries.
	www.zawya.com /story.cfm/sidZAWYA20051024034450 (1274 words)

	China Revaluation
		Between 1949 and 1972, China established an official exchange rate and a single peg that was calculated based upon the relative price level of the currency, foreign currencies and the cost of exporting.
		The exchange rate remained relatively stable at this time especially since there were minimal exporting activities in China at the time.
		In 1994, the 2 currencies were united at a rate of 8.7 per US dollar and the rate was managed within a tight 0.3% band by China's central bank.
	www.chinarevaluation.com /history_of_growth_fixed_exchange_rate.shtml (261 words)

	AEI - Short Publications (Site not responding. Last check: 2007-09-17)
		The third major flaw is the elimination of exchange rate changes as a means of adjusting for differences in regional experience.
		If exchange rates are fixed, as in a monetary union, some other means of adjustment must be found.
		Very small countries should eliminate the monetary operations of their central banks by establishing a currency board or a permanently fixed exchange rate, and to enforce their commitment those countries should permit their citizens to use a noninflating foreign currency as a medium of exchange or parallel currency.
	www.aei.org /publications/filter.all,pubID.6514/pub_detail.asp (2097 words)

	Adapting Your Software for the Euro - Sybase Inc
		The second major concept is that the exchange rates of the participating national currencies no longer fluctuate.
		The fluctuating exchange rates are now replaced by a fixed exchange rate in relation to the euro.
		For example, the fluctuating rate between French francs and German marks is now replaced by a fixed rate between the French franc and the euro and a fixed rate between the German mark and the euro.
	www.sybase.com /detail?id=1009208 (1189 words)

	ASIL Insights: China’s Fixed Exchange Rate for the Yuan
		A first glance, it may appear that the Chinese fixed exchange rate is not targeted selectively toward a special sector of the Chinese economy, but on the contrary, is available for all sectors of the Chinese economy.
		In fact, in the case of the Chinese fixed exchange rate system, it seems that the free marketplace is not only difficult to identify, but is simply non existent.
		Indeed, one cannot reject the hypothesis that the provision or the conversion of foreign currency at a fixed rate could be perceived as equivalent to a service given by the Chinese government or by bodies entrusted by it.
	www.asil.org /insights/insigh117.htm (1287 words)

	Brough, The Natural Law of Money, Front Matter: Library of Economics and Liberty
		If the government further requires that the bad currency be exchangeable with another (good) currency at face value (i.e., at a fixed exchange rate), the bad currency will most certainly replace the good one in circulation.
		If gold or silver coins are required by law—fiat—to exchange with paper money at a fixed rate, and afterwards the quantity of paper money increases relative to that of the precious metal, the paper money will supplant the coin in daily transactions.
		Consequently, today, flexible exchange rates, supplied by nations implicitly competing in world money markets and simultaneously allowing their citizens access to those international money markets, enable people to substitute quickly their holdings of their domestic currencies for other currencies if they lose faith.
	www.econlib.org /LIBRARY/YPDBooks/Brough/brghNLM0.html (1420 words)

	Currency Exchange Rate (Site not responding. Last check: 2007-09-17)
		A country fixes the exchange rate between its currency and an important foreign currency...
		Exchange rates for top currencies and currency converter including over 100 countries.
		An exchange rate is the rate of exchange between two currencies.
	currency-exchange-rate.currencyexchangeplus.info (906 words)

	Omar rejects fixed exchange rate - JAMAICAOBSERVER.COM
		According to the finance minister, a fixed exchange regime had costs, and "a critical one relates to the removal of flexibility to respond to domestic and external shocks".
		Seaga, in his presentation, had told Parliament that a strong case existed to examine the option of either a currency board with a fixed rate of exchange, or an independent Central Bank with a special regime to maintain a pegged rate, "as the means of ending the frustrations of a stagnant, debt-ridden economy".
		However, he said that the fixed rate "locked Argentina into certain structural deficiencies which could not be adjusted in the face of the fixed exchange rate".
	www.jamaicaobserver.com /news/html/20040428T230000-0500_59169_OBS_OMAR_REJECTS_FIXED_EXCHANGE_RATE.asp (713 words)

	Floating And Fixed Exchange Rates
		A fixed, or pegged, rate is a rate the government (central bank) sets and maintains as the official exchange rate.
		Unlike the fixed rate, a floating exchange rate is determined by the private market through supply and demand.
		Fixed regimes, however, can often lead to severe financial crises since a peg is difficult to maintain in the long run.
	www.investopedia.com /articles/03/020603.asp (1542 words)

	Finance: Chapter 80-7: Central Bank Intervention with Fixed Exchange Rates
		In a fixed exchange rate system most of the transactions of one currency for another will take place in the private market between individuals, businesses and international banks.
		However, by fixing the exchange rate the government would have declared illegal any transactions that do not occur at the announced rate.
		However, it is very unlikely that the announced fixed exchange rate will at all times equalize private demand for foreign currency with private supply.
	www.internationalecon.com /Finance/Fch80/F80-7.php (446 words)

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