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Exchange Rate System Research Paper

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EXCHANGE RATE SYSTEM
An exchange rate system is a system in which the national currency of one nation is linked by the national currency of another nation through an exchange rate. This exchange rate is usually a fixed ratio.
The exchange rate has two components that is domestic currency and foreign currency. The domestic currency belongs to the nation and foreign currency belongs to the nation which it is comparing.
In direct sense, usually the price of a unit of a foreign currency is expressed in the terms of the value of domestic currency whereas the price of a unit of domestic currency is expressed in terms of the foreign currency.
An exchange rate which does not have a domestic currency as one of its components is known as cross exchange …show more content…

3. Pegged float exchange rate

Pegged floating basically means that the currency values are pegged to some value or band which is either fixed or which is periodical. Its the combination of both floating exchange rate as well as fixed exchange rate. Like incase of some situations the rates will be fixed whereas in other situations the rates will be floating. This helps the importers or the exporters to reduce the risk of rate of exchange by helping them to safely plan for their future operations or activities. Moreover the inflationary pressures are reduced and balanced.

Impact of the Exchange Rates.

1. First of all we can say it has a high impact on the economy of a country. The fluctuation that takes place because of the exchange rates has a great influence on the economy of a country as a whole. It also helps in the growth and development of an …show more content…

Demand and supply - Another factor that influence the exchange rate is the demand and supply factors. For example inflation, interest rates, actions of the central bank etc.

Under the Exchange Rate System, we have the following standard.

Gold Standard is that system in which the country's currency or coins are converted or which is directly linked to gold. The paper value is converted into gold thus there's a price fixed for gold and gold is brought and sold at that fixed price. This is known as gold standards.

Under this standard, we have the following 3 types of standards. 1. Gold Currency Standards.
2. Gold Bullion Standards.
3. Gold exchange Standards.

1. Gold Currency Standards- This standard is the first standard of the gold standard system. It actually started when the countries accepted gold as currency. So we can say that, these are like monetary units that we take into consideration which has the value of the circulating gold. But the remaining coins maybe of some other metal. The monetary value is considered on the circulating value of gold and the remaining coins will not have much value because it is of some other

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