Types of Floating Exchange Rate System

Exchange rate can be defined as the value of one currency in terms of another. India follows floating exchange rate system for the determination of the exchange rate. Floating exchange rate system can be defined as a system where the exchange rate between currencies are not fixed but they keep fluctuating, as they are determined by the demand and supply for the domestic currency in the international market. Floating exchange rate system is of two types –

1. Free Float – Under this the exchange rate of a country is determined by the market and there is no intervention either by the government or the central bank of the country. It is determined by the interaction of the demand and supply for the currency. Under this system there is a risk of the currency either appreciating or deprecating suddenly resulting in currency coming in to pressure and becoming more volatile. It is also called clean float.

2. Managed Float – In order to reduce the volatility in currency countries follow managed float, under this system central banks of the country tend to intervene from time to time in order to smoothen the fluctuations in the exchange rate in the currency market.

0 comments… add one

Leave a Comment


Related pages


normal goods and inferior goods examplesadvantages and disadvantages of stock market investingbenefits of a swot analysisdirect quote forexaccrued income exampleexamples of elastic goodsjournal entry for prepaid expenseadvantages and disadvantages of socialist economywhat is a consigneradvantages and disadvantages of commodity exchangeunsystematic risk definitiondifference between income and substitution effectmeaning of drawer drawee and payeewhat are the characteristics of traditional economycompare and contrast socialism and capitalismcomparative balance sheet formatwhat are fictitious assetsmateriality principledupont analysis equationwhat is conglomerate mergerrelevant costing for managerial decisionsadvantages of a debenturecapital turnover ratio calculationhorizontal merger meaningdisadvantages of deflationdisadvantages of process costingdisadvantages of urbanisationprepaid expense meaninghorizontal and vertical analysis of a financial statementassumptions of the law of diminishing marginal utilityprivatization advantagesdefinition consignordisadvantages of marketing segmentationhow to fill out a withdrawal slip at a bankexamples of vertical mergercongeneric mergerconcept of capmfull form of cpiadvantages of takeoversfull form of fmcg productsadvantages and disadvantages of perfect competitionadvantages and disadvantages of autocratic managementhypothecation of goodsformula for degree of operating leveragewhy is deflation a problemglobalization in the caribbean advantages and disadvantagescommand economy advantages and disadvantagespositives of urbanisationdifference between trading account and demat accountexample of the law of diminishing returnswhat are some examples of durable and nondurable goodsconsortium finance meaningskimming policycost of deflationideal cibil scoreindirect quotation exchange ratewhat is the difference between implicit and explicit costbenefits of monopoliesdifference between an operating lease and a finance leaseskimming pricing strategy exampleperpetual successiondupont roe analysischaracteristics of a traditional economymeaning of trial balanceexample of unearned revenuenon redeemable preference sharesdisadvantages of private sectoradvantage of hire purchasepitfalls of capitalismdefinition of profitability ratiosvertical merger advantages and disadvantagesdisadvantages of cash budgetunearned revenue adjusting entry