Fixed and Floating Exchange Rates

This is a video recording of a revision webinar looking at the economics of floating, managed floating and fixed exchange rates.

The choice of exchange rate regime is one of the most important a country can make as part of monetary policy.  The main options are:

1. A free-floating currency where the external value of a currency depends wholly on market forces of supply and demand
2. A managed-floating currency when the central bank may choose to intervene in the foreign exchange markets to affect the value of a currency to meet specific macroeconomic objectives
3. A fixed exchange rate system e.g. a currency peg either as part of a currency board system or membership of the ERM II for countries intending to join the Euro.