Talk:Exchange rate regime

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exchange rate regime in countries in transition

Link to Spanish article?

Should this article be linked to the article Regímenes cambiarios? The articles are strucured very differently and have different coverage (the Spanish article is far more detailed), but both do discuss exchange rate regimes.

The reason why a country may want to switch to Fixed/Pegged Exchange Rate Policy are as follows: 1. Instability in its BOP 2. To reduce speculation in its economy 3. To facilitate or attract Foreign Direct Investment (FDI) through a stable and certain business enevironment 4. To address major Macro-economic problems such as Inflation (Reducing Imported Inflation), and Unemployment

As well, Floating Exchange Rate Policy is found to be viable to Economically Stable Countries such as the USA, RSA, and UK where their currency are able to compete on the Forex Market (Hard Currencies). Below may add to the advantages and reasons of switching to Floating Exchange Rate Policy:

a) It reflects the real performance of your economy with reference to other economies b) Through the 'Price Effect', the market forces will clear all the arbitrage possibilities thereby reaching to Equilibrium Exchange Rate and BOP (Nurtsse) c) Free Floating Policies reduces economic and Political ties between governments in trade d) It induces competion hence efficiency in the product markets and also raises the living standards of within an economy

NB: Remember each of the described policies above have also their disadvantages: (Solusi University: Jedzah)