SlideShare una empresa de Scribd logo
1 de 11
Descargar para leer sin conexión
Fixed vs Floating 
Exchange Rate 
System 
By 
Pankaj Newar 
13A2HP029
AGENDA 
Fixed Exchange Rates 
Benefits 
Breakup of Fixed Exchange Rate 
Floating Exchange Rate 
Benefits
Exchange Rates 
It is value of one nations currency in 
comparison to another 
Types: 
1) Fixed Exchange Rate 
2) Floating Exchange Rate
Fixed Exchange Rates 
A fixed exchange rate pegs one 
country's currency to another country’s 
currency 
The government of a country doesn’t 
let the exchange rate change in 
accordance with the demand and 
supply for the currency 
The purpose of a fixed rate system is 
to maintain a country’s currency value 
within a very narrow band.
Country with Fixed Exchange 
Rate 
Country Currency Peg Rate Peg Currency 
Bermuda Bermuda 
Dollar (BMD) 
1 USD 
UAE Dirham 3.673 USD 
Denmark Danish Krone 7.46 EUR 
Nepal Rupee 1.6 INR 
Latvia Lats (LVL) 0.7028 EUR
Benefits 
Promote International Trade 
Helpful for Small Nations 
Restricts Speculation 
Major Crisis 
Mexican Peso Crisis, 1994 
Asian Currency Crisis, 1997
Breakup of Fixed Exchange 
Rate 
Macroeconomic Policy Package of 
1965-1968 i.e., 
1) Finance Vietnam Conflicts 
2) Own welfare programs 
 In August 1971, US President 
announced that dollar was no longer 
convertible into gold 
 By March 1973, most of the currency 
began to float against each other
Floating Exchange Rate 
System 
A country's exchange rate regime 
where its currency is set by the 
foreign-exchange market through 
supply and demand for that particular 
currency relative to other currencies. 
Most widely traded currencies: US 
dollar, Euro, Japanese Yen, British 
pound & Australian Dollar
Benefits 
 Automatic BOP adjustments 
 Independent Monetary Policy 
 Promotes Economic Development 
 Increase in Liquidity
Conclusion 
There is no right answer for which 
exhange rate is better 
Advanced Economy: Floating Rate 
Emerging Economy: May gain from 
floating rate 
Underdeveloped Economy: Fixed 
Rate
Fixed vs floating exchange rate system

Más contenido relacionado

La actualidad más candente

Foreign Exchange Reserves
Foreign Exchange ReservesForeign Exchange Reserves
Foreign Exchange ReservesGhulam Hasnain
 
Foreign exchange market-final ppt(my)
Foreign exchange market-final ppt(my)Foreign exchange market-final ppt(my)
Foreign exchange market-final ppt(my)J Prateek Kundu
 
SPECIAL DRAWING RIGHTS
SPECIAL DRAWING RIGHTSSPECIAL DRAWING RIGHTS
SPECIAL DRAWING RIGHTSKunthavai ..
 
Balance of payment & exchange rate
Balance of payment & exchange rateBalance of payment & exchange rate
Balance of payment & exchange rateMeenal Gupta
 
International monetary system
International monetary systemInternational monetary system
International monetary systemtulasi
 
Exchange rate determination
Exchange rate determinationExchange rate determination
Exchange rate determinationMariya Jasmine
 
Foreign exchange
Foreign exchangeForeign exchange
Foreign exchangeUmair Aslam
 
Interest rate parity 1
Interest rate parity 1Interest rate parity 1
Interest rate parity 1Anshu Singh
 
Chapter 13_The Foreign Exchange Market
Chapter 13_The Foreign Exchange MarketChapter 13_The Foreign Exchange Market
Chapter 13_The Foreign Exchange MarketRusman Mukhlis
 
Foreign exchange market
Foreign exchange marketForeign exchange market
Foreign exchange marketVisakhapatnam
 
History of exchange rates
History of exchange ratesHistory of exchange rates
History of exchange ratesAvijit Sarkar
 
Determination of exchange rate chapter 6
Determination of exchange rate chapter 6Determination of exchange rate chapter 6
Determination of exchange rate chapter 6Nayan Vaghela
 
Automatic adjustment in Balance of Payments
Automatic adjustment in Balance of PaymentsAutomatic adjustment in Balance of Payments
Automatic adjustment in Balance of PaymentsDrJagdish Maheshwari
 

La actualidad más candente (20)

Foreign direct investment
Foreign direct investmentForeign direct investment
Foreign direct investment
 
Exchange rate regimes
Exchange rate regimesExchange rate regimes
Exchange rate regimes
 
Foreign Exchange Reserves
Foreign Exchange ReservesForeign Exchange Reserves
Foreign Exchange Reserves
 
Foreign exchange market-final ppt(my)
Foreign exchange market-final ppt(my)Foreign exchange market-final ppt(my)
Foreign exchange market-final ppt(my)
 
Global capital market and international lending
Global capital market and international lendingGlobal capital market and international lending
Global capital market and international lending
 
Foreign direct investment
Foreign direct investmentForeign direct investment
Foreign direct investment
 
SPECIAL DRAWING RIGHTS
SPECIAL DRAWING RIGHTSSPECIAL DRAWING RIGHTS
SPECIAL DRAWING RIGHTS
 
Regional Economic Integration
Regional Economic IntegrationRegional Economic Integration
Regional Economic Integration
 
Balance of payment & exchange rate
Balance of payment & exchange rateBalance of payment & exchange rate
Balance of payment & exchange rate
 
Exchange Rate Theory
Exchange Rate TheoryExchange Rate Theory
Exchange Rate Theory
 
International monetary system
International monetary systemInternational monetary system
International monetary system
 
Exchange rate determination
Exchange rate determinationExchange rate determination
Exchange rate determination
 
International monetary system
International monetary system International monetary system
International monetary system
 
Foreign exchange
Foreign exchangeForeign exchange
Foreign exchange
 
Interest rate parity 1
Interest rate parity 1Interest rate parity 1
Interest rate parity 1
 
Chapter 13_The Foreign Exchange Market
Chapter 13_The Foreign Exchange MarketChapter 13_The Foreign Exchange Market
Chapter 13_The Foreign Exchange Market
 
Foreign exchange market
Foreign exchange marketForeign exchange market
Foreign exchange market
 
History of exchange rates
History of exchange ratesHistory of exchange rates
History of exchange rates
 
Determination of exchange rate chapter 6
Determination of exchange rate chapter 6Determination of exchange rate chapter 6
Determination of exchange rate chapter 6
 
Automatic adjustment in Balance of Payments
Automatic adjustment in Balance of PaymentsAutomatic adjustment in Balance of Payments
Automatic adjustment in Balance of Payments
 

Similar a Fixed vs floating exchange rate system

International monetary system
International monetary systemInternational monetary system
International monetary systemGAURAV SHARMA
 
Exchange rate behaviour
Exchange rate behaviourExchange rate behaviour
Exchange rate behaviourviki Khan
 
M03 eiteman0136091008 12_mbf_c03
M03 eiteman0136091008 12_mbf_c03M03 eiteman0136091008 12_mbf_c03
M03 eiteman0136091008 12_mbf_c03satluy
 
Mgnt 4670 Ch 11 Intl Monetary System (Fall 2007)
Mgnt 4670 Ch 11  Intl Monetary System (Fall 2007)Mgnt 4670 Ch 11  Intl Monetary System (Fall 2007)
Mgnt 4670 Ch 11 Intl Monetary System (Fall 2007)knksmart
 
Mgnt 4670 Ch 11 Intl Monetary System (Fall 2007)
Mgnt 4670 Ch 11  Intl Monetary System (Fall 2007)Mgnt 4670 Ch 11  Intl Monetary System (Fall 2007)
Mgnt 4670 Ch 11 Intl Monetary System (Fall 2007)knksmart
 
Chapter 06a
Chapter 06aChapter 06a
Chapter 06aArsl57
 
The history of international monetary system
The history of international monetary systemThe history of international monetary system
The history of international monetary systemSuleyman Ally
 
Exchange rates
Exchange ratesExchange rates
Exchange ratescmsrahaman
 
Analysis of forex market
Analysis of forex marketAnalysis of forex market
Analysis of forex marketsaiwagh2001
 
Exchangeratesystem 121213104444-phpapp02
Exchangeratesystem 121213104444-phpapp02Exchangeratesystem 121213104444-phpapp02
Exchangeratesystem 121213104444-phpapp02AmithRaj007
 
International monetary system and foreign exchange
International monetary system and foreign exchangeInternational monetary system and foreign exchange
International monetary system and foreign exchangeNeha Suman
 
International monetary system
International monetary systemInternational monetary system
International monetary systemManjul Shrestha
 

Similar a Fixed vs floating exchange rate system (20)

International monetary system
International monetary systemInternational monetary system
International monetary system
 
Exchange rate behaviour
Exchange rate behaviourExchange rate behaviour
Exchange rate behaviour
 
M03 eiteman0136091008 12_mbf_c03
M03 eiteman0136091008 12_mbf_c03M03 eiteman0136091008 12_mbf_c03
M03 eiteman0136091008 12_mbf_c03
 
Internatinal inventory system
Internatinal inventory systemInternatinal inventory system
Internatinal inventory system
 
Mgnt 4670 Ch 11 Intl Monetary System (Fall 2007)
Mgnt 4670 Ch 11  Intl Monetary System (Fall 2007)Mgnt 4670 Ch 11  Intl Monetary System (Fall 2007)
Mgnt 4670 Ch 11 Intl Monetary System (Fall 2007)
 
Mgnt 4670 Ch 11 Intl Monetary System (Fall 2007)
Mgnt 4670 Ch 11  Intl Monetary System (Fall 2007)Mgnt 4670 Ch 11  Intl Monetary System (Fall 2007)
Mgnt 4670 Ch 11 Intl Monetary System (Fall 2007)
 
Government Influence on Exchange Rates
Government Influence on Exchange RatesGovernment Influence on Exchange Rates
Government Influence on Exchange Rates
 
Chapter 06a
Chapter 06aChapter 06a
Chapter 06a
 
Chap03.ppt
Chap03.pptChap03.ppt
Chap03.ppt
 
Forex.ppt
Forex.pptForex.ppt
Forex.ppt
 
IBF-I.pptx
IBF-I.pptxIBF-I.pptx
IBF-I.pptx
 
1
11
1
 
The history of international monetary system
The history of international monetary systemThe history of international monetary system
The history of international monetary system
 
International finance
International financeInternational finance
International finance
 
Exchange rates
Exchange ratesExchange rates
Exchange rates
 
Analysis of forex market
Analysis of forex marketAnalysis of forex market
Analysis of forex market
 
Exchangeratesystem 121213104444-phpapp02
Exchangeratesystem 121213104444-phpapp02Exchangeratesystem 121213104444-phpapp02
Exchangeratesystem 121213104444-phpapp02
 
International monetary system and foreign exchange
International monetary system and foreign exchangeInternational monetary system and foreign exchange
International monetary system and foreign exchange
 
Imf 2019
Imf 2019Imf 2019
Imf 2019
 
International monetary system
International monetary systemInternational monetary system
International monetary system
 

Último

NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023Steve Rader
 
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003believeminhh
 
Developing Coaching Skills: Mine, Yours, Ours
Developing Coaching Skills: Mine, Yours, OursDeveloping Coaching Skills: Mine, Yours, Ours
Developing Coaching Skills: Mine, Yours, OursKaiNexus
 
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdfChicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdfSourav Sikder
 
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...IMARC Group
 
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...Brian Solis
 
Tata Kelola Bisnis perushaan yang bergerak
Tata Kelola Bisnis perushaan yang bergerakTata Kelola Bisnis perushaan yang bergerak
Tata Kelola Bisnis perushaan yang bergerakEditores1
 
Building Your Personal Brand on LinkedIn - Expert Planet- 2024
 Building Your Personal Brand on LinkedIn - Expert Planet-  2024 Building Your Personal Brand on LinkedIn - Expert Planet-  2024
Building Your Personal Brand on LinkedIn - Expert Planet- 2024Stephan Koning
 
Plano de marketing- inglês em formato ppt
Plano de marketing- inglês  em formato pptPlano de marketing- inglês  em formato ppt
Plano de marketing- inglês em formato pptElizangelaSoaresdaCo
 
MC Heights construction company in Jhang
MC Heights construction company in JhangMC Heights construction company in Jhang
MC Heights construction company in Jhangmcgroupjeya
 
Team B Mind Map for Organizational Chg..
Team B Mind Map for Organizational Chg..Team B Mind Map for Organizational Chg..
Team B Mind Map for Organizational Chg..dlewis191
 
PDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdfPDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdfHajeJanKamps
 
A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.mcshagufta46
 
Anyhr.io | Presentation HR&Recruiting agency
Anyhr.io | Presentation HR&Recruiting agencyAnyhr.io | Presentation HR&Recruiting agency
Anyhr.io | Presentation HR&Recruiting agencyHanna Klim
 
PDT 88 - 4 million seed - Seed - Protecto.pdf
PDT 88 - 4 million seed - Seed - Protecto.pdfPDT 88 - 4 million seed - Seed - Protecto.pdf
PDT 88 - 4 million seed - Seed - Protecto.pdfHajeJanKamps
 
Michael Vidyakin: Introduction to PMO (UA)
Michael Vidyakin: Introduction to PMO (UA)Michael Vidyakin: Introduction to PMO (UA)
Michael Vidyakin: Introduction to PMO (UA)Lviv Startup Club
 
Introduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptxIntroduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptxJemalSeid25
 
7movierulz.uk
7movierulz.uk7movierulz.uk
7movierulz.ukaroemirsr
 

Último (20)

NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023
 
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003
 
Developing Coaching Skills: Mine, Yours, Ours
Developing Coaching Skills: Mine, Yours, OursDeveloping Coaching Skills: Mine, Yours, Ours
Developing Coaching Skills: Mine, Yours, Ours
 
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdfChicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
 
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
 
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
The End of Business as Usual: Rewire the Way You Work to Succeed in the Consu...
 
Tata Kelola Bisnis perushaan yang bergerak
Tata Kelola Bisnis perushaan yang bergerakTata Kelola Bisnis perushaan yang bergerak
Tata Kelola Bisnis perushaan yang bergerak
 
Building Your Personal Brand on LinkedIn - Expert Planet- 2024
 Building Your Personal Brand on LinkedIn - Expert Planet-  2024 Building Your Personal Brand on LinkedIn - Expert Planet-  2024
Building Your Personal Brand on LinkedIn - Expert Planet- 2024
 
Plano de marketing- inglês em formato ppt
Plano de marketing- inglês  em formato pptPlano de marketing- inglês  em formato ppt
Plano de marketing- inglês em formato ppt
 
MC Heights construction company in Jhang
MC Heights construction company in JhangMC Heights construction company in Jhang
MC Heights construction company in Jhang
 
Team B Mind Map for Organizational Chg..
Team B Mind Map for Organizational Chg..Team B Mind Map for Organizational Chg..
Team B Mind Map for Organizational Chg..
 
PDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdfPDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdf
 
A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.A flour, rice and Suji company in Jhang.
A flour, rice and Suji company in Jhang.
 
Anyhr.io | Presentation HR&Recruiting agency
Anyhr.io | Presentation HR&Recruiting agencyAnyhr.io | Presentation HR&Recruiting agency
Anyhr.io | Presentation HR&Recruiting agency
 
PDT 88 - 4 million seed - Seed - Protecto.pdf
PDT 88 - 4 million seed - Seed - Protecto.pdfPDT 88 - 4 million seed - Seed - Protecto.pdf
PDT 88 - 4 million seed - Seed - Protecto.pdf
 
Investment Opportunity for Thailand's Automotive & EV Industries
Investment Opportunity for Thailand's Automotive & EV IndustriesInvestment Opportunity for Thailand's Automotive & EV Industries
Investment Opportunity for Thailand's Automotive & EV Industries
 
Michael Vidyakin: Introduction to PMO (UA)
Michael Vidyakin: Introduction to PMO (UA)Michael Vidyakin: Introduction to PMO (UA)
Michael Vidyakin: Introduction to PMO (UA)
 
Introduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptxIntroduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptx
 
7movierulz.uk
7movierulz.uk7movierulz.uk
7movierulz.uk
 
WAM Corporate Presentation Mar 25 2024.pdf
WAM Corporate Presentation Mar 25 2024.pdfWAM Corporate Presentation Mar 25 2024.pdf
WAM Corporate Presentation Mar 25 2024.pdf
 

Fixed vs floating exchange rate system

  • 1. Fixed vs Floating Exchange Rate System By Pankaj Newar 13A2HP029
  • 2. AGENDA Fixed Exchange Rates Benefits Breakup of Fixed Exchange Rate Floating Exchange Rate Benefits
  • 3. Exchange Rates It is value of one nations currency in comparison to another Types: 1) Fixed Exchange Rate 2) Floating Exchange Rate
  • 4. Fixed Exchange Rates A fixed exchange rate pegs one country's currency to another country’s currency The government of a country doesn’t let the exchange rate change in accordance with the demand and supply for the currency The purpose of a fixed rate system is to maintain a country’s currency value within a very narrow band.
  • 5. Country with Fixed Exchange Rate Country Currency Peg Rate Peg Currency Bermuda Bermuda Dollar (BMD) 1 USD UAE Dirham 3.673 USD Denmark Danish Krone 7.46 EUR Nepal Rupee 1.6 INR Latvia Lats (LVL) 0.7028 EUR
  • 6. Benefits Promote International Trade Helpful for Small Nations Restricts Speculation Major Crisis Mexican Peso Crisis, 1994 Asian Currency Crisis, 1997
  • 7. Breakup of Fixed Exchange Rate Macroeconomic Policy Package of 1965-1968 i.e., 1) Finance Vietnam Conflicts 2) Own welfare programs  In August 1971, US President announced that dollar was no longer convertible into gold  By March 1973, most of the currency began to float against each other
  • 8. Floating Exchange Rate System A country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that particular currency relative to other currencies. Most widely traded currencies: US dollar, Euro, Japanese Yen, British pound & Australian Dollar
  • 9. Benefits  Automatic BOP adjustments  Independent Monetary Policy  Promotes Economic Development  Increase in Liquidity
  • 10. Conclusion There is no right answer for which exhange rate is better Advanced Economy: Floating Rate Emerging Economy: May gain from floating rate Underdeveloped Economy: Fixed Rate