In this revision video we focus on the economics of managed floating exchange rates.
A managed floating exchange rate is an exchange rate system that allows a nation’s central bank to intervene regularly in foreign exchange markets to change the direction of the currency’s float and/or reduce the amount of currency volatility. This exchange rate system is also known as a “dirty float”.
Motivations for managing a floating currency through intervention
Central bank might attempt to bring about a depreciation to:
Or to bring about an appreciation of the currency
Limits to central bank intervention to manage a currency’s value
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