EXCHANGE RATE SYSTEMS IN DIFFERENT COUNTRIES

sunandaC

New member
EXCHANGE RATE SYSTEMS IN DIFFERENT COUNTRIES

The member countries generally accept the IMF classification of exchange rate regime, which is based on the degree of exchange rate flexibility that a particular regime reflects. However, it has been generally observed that there exists no strict relationship between a particular regime and the degree of exchange rate flexibility it faces, either at the nominal or real exchange rate levels.

The exchange rate arrangements adopted by the developing countries cover a broad spectrum, which are as follows:

a) Single Currency Peg
The country pegs to a major currency, usually the U. S. Dollar or the French franc (Ex-French colonies) with infrequent adjustment of the parity. Many of the developing countries have single currency pegs.

b) Composite Currency Peg
Taking into account the currencies of major trading partners forms a currency composite. The objective is to make the home currency more stable than if a single peg was used. Currency weights are generally based on trade in goods – exports, imports, or total trade. About one fourth of the developing countries have composite currency pegs.

c) Flexible Limited vis-à-vis Single Currency

The value of the home currency is maintained within margins of the peg. Some of the Middle Eastern countries have adopted this system.

d) Adjusted to indicators

The currency is adjusted more or less automatically to changes in selected macro-economic indicators. A common indicator is the real effective exchange rate (REER) that reflects inflation-adjusted change in the home currency vis-à-vis major trading partners.

e) Managed floating

The Central Bank sets the exchange rate, but adjusts it frequently according to certain pre-determined indicators such as the balance of payments position, foreign exchange reserves or parallel market spreads and adjustments are not automatic.

f) Independently floating

Free market forces determine exchange rates. The system actually operates with different levels of intervention in foreign exchange markets by the central bank.

It is important to note that these classifications do conceal several features of the developing country exchange rate regimes. A particular regime may be compatible with dual or multiple rates separate exchange rates for capital and current account transactions, a combination of fixed-floating arrangement and tax-subsidy schemes for export – import trade.
 

rosemarry2

MP Guru
EXCHANGE RATE SYSTEMS IN DIFFERENT COUNTRIES

The member countries generally accept the IMF classification of exchange rate regime, which is based on the degree of exchange rate flexibility that a particular regime reflects. However, it has been generally observed that there exists no strict relationship between a particular regime and the degree of exchange rate flexibility it faces, either at the nominal or real exchange rate levels.

The exchange rate arrangements adopted by the developing countries cover a broad spectrum, which are as follows:

a) Single Currency Peg
The country pegs to a major currency, usually the U. S. Dollar or the French franc (Ex-French colonies) with infrequent adjustment of the parity. Many of the developing countries have single currency pegs.

b) Composite Currency Peg
Taking into account the currencies of major trading partners forms a currency composite. The objective is to make the home currency more stable than if a single peg was used. Currency weights are generally based on trade in goods – exports, imports, or total trade. About one fourth of the developing countries have composite currency pegs.

c) Flexible Limited vis-à-vis Single Currency

The value of the home currency is maintained within margins of the peg. Some of the Middle Eastern countries have adopted this system.

d) Adjusted to indicators

The currency is adjusted more or less automatically to changes in selected macro-economic indicators. A common indicator is the real effective exchange rate (REER) that reflects inflation-adjusted change in the home currency vis-à-vis major trading partners.

e) Managed floating

The Central Bank sets the exchange rate, but adjusts it frequently according to certain pre-determined indicators such as the balance of payments position, foreign exchange reserves or parallel market spreads and adjustments are not automatic.

f) Independently floating

Free market forces determine exchange rates. The system actually operates with different levels of intervention in foreign exchange markets by the central bank.

It is important to note that these classifications do conceal several features of the developing country exchange rate regimes. A particular regime may be compatible with dual or multiple rates separate exchange rates for capital and current account transactions, a combination of fixed-floating arrangement and tax-subsidy schemes for export – import trade.

Hi there,

Here I am uploading Choice Of Exchange Rate Regimes For Developing Countries, so please download and check it.
 

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