Aartee Mishra is teaching live on Unacademy Plus
aily Lectuire Series Ramesh Singh' V brief summary o unacadeny 1 Indian Economy y Aartee Mishra External Sector inIndia Hindi
lam Aartee Mishra Graduated from Delhi University, Topper in all my semesters, Pursuing P.G and preparing for CSE. 2 Years of teaching experience of General Studies for competitive examination Have been teaching on Unacademy Plus
FIXED CURRENCY REGIME A method of regulating exchange rates of world currencies brought by the IMF. In this system exchange rate of a particular currency was fixed by the IMF keeping the currency in front of a basket of important world currencies (they were UKE, US $, Japanese *, German Mark DM and the French Franc FFr) Different economies were supposed to maintain that particular exchange rate in future. Exchange rates of currencies were modified by the IMF from time to time,
FLOATING CURRENCY REGIME A method of regulating exchange rates of world currencies based on the market mechanism (i.e., demand and supply). In the follow up to the fixed currency system of exchange rate determination, it was the UK which blamed the system for its payment crisis of late 1960s. Looking at the major loopholes in this system, the UK government decided to switch over to the floating currency regime in 1973-the same year the IMF allowed an option to its member countries to go for either of the currency systems. In the floating exchange rate system, a domestic currency is left free to float against a number of foreign currencies in its foreign exchange market and determine its own value. Such exchange rates, are also called as market driven or based exchange rates, which are regulated by factors such as the demand and supply of the domestic and the foreign currencies in the concerned economy.
MANAGED EXCHANGE RATES A managed-exchange-rate system is a hybrid or mixture of the fixed and flexible exchange rate systems in which the government of the economy attempts to affect the exchange rate directly by buying or selling foreign currencies or indirectly, through monetary policy6 (i.e., by lowering or raising interest rates on foreign currency bank accounts, affecting foreigninvestment etc.). Today, most of the economies have shifted to this system of exchange rate determination. Almost all countries tend to intervene when the markets become disorderly or the fundamentals of economics are challenged by the exchange rate of the time. Some of the major examples of the managedexchange-rate system have been given below: Some countries allow to free float their currencies and allow the market forces to determine their exchange rate with rare government intervention. This is the idea from which the floating currency regime basically emerged. The USA and the EU are the major examples in this category.
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