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

securitization of accounts receivablebartering systemwhat is an unearned revenueinferior and normal goodsadvantages and disadvantages of oligopoly market structurecurrent liabilities definition in accountingbank loans and overdraftsunearned revenue accountingfeatures of an oligopolymoil ipothe balance of an unearned revenue accountadvantages of zero based budgetingdiversifiable risk definitionbarter system examplesexplain the expenditure method of measuring national incomeadvantages and disadvantages of a bank loanwhat is slr crrmeaning consigneeexample of unitary elastic demanddisadvantage of mixed economydistinguish between costs and expensesadvantages and disadvantages of functional organizational structurewhat are substitutes and complements in economicscapital turnover ratio calculationadvantages of lifo inventory methoddeclining depreciation methodwhat does horizontal merger meanadvantages of fiiwhat is the full form of tdsmeaning of fifo methoddemerits of advertisingwhat is direct quotation and indirect quotationmonopolisticsadvantages and disadvantages of a market economypros of a command economyconglomerate merger examplesautocratic decision makingglobalisation advantages and disadvantagesexamples of conglomerate diversificationwhat is leverage ratioswhat is a withdrawal slipbenefits of cashless policyhypothicationeconomics substitute goodsdefinition of bearer chequerelevant cost managerial accountingdisadvantages of process costingbenefits and drawbacks of capitalismadvantages and disadvantages of living in rural and urban areasbenefits of monopoliesthe autocratic leaderdebentures as a source of financefifo method accountingbenefit of ppfmarket skimming strategy exampledisadvantages of venture capitalsystematic risk and unsystematic risk examplesexamples of period costsdisadvantages of competitive pricingwhat is full form of slrgolden rules of accounts with exampleswhat is the difference between accounts receivable and accounts payablepayback financeaccounting treatment for contingent liabilitiesdefine crossed chequepersonal real nominal accounts ruleswhat is law of diminishing returns in economicsmeaning of wholesalingfictitious assets wikipediadifference between oligopoly and perfect competitionsystematic risk and unsystematic risk examplesadvantages and disadvantages of secured loansdebit card advantages