Floating Exchange Market

Over the period of 2005 to 2010, the Japanese Yen has depreciated rapidly. In 2007, the Yen exchange rate was $ 70.61 to a US dollar. In 2009 to 2010 the rate was 80.57 and 85.67 to a dollar. To comprehend more in-depth what is occurring in the Japanese exchange market it is important to understand the meaning of exchange rate, fixed exchange rate and floating rate.
According to the Merriam- Webster Dictionary an exchange rate is defined as” a number that is used to calculate the difference in value between money from one country and money from another country. The exchange rate regime is the method experts use to manage its currency in relations to other currencies and the foreign exchange market. Two factor of this are fixed exchange rate

Hence, affecting other countries by reducing their surplus as deflation burdens spending power.
Arguments for and against Floating Exchange rate
The floating exchange or the flexible rate has been used by most countries. The flexible rate allows for independent monetary policies. Unlike fixed exchange rate that is based on gold standard and the metallic standard, floating exchange need no monetary officials to monitor account imbalances, it allows government to have freedom to obtain internal policies and objectives without the external restrictions.
In addition, the floating rate is one that is flexible as the name also suggested. The floating exchange rate allows the currency to change in the direction of the trading market. If the exchange rate changes, the variable of the economy changes in the appropriate division. If demand for exports from a country declines, then output also declines and so the currency depreciates. In turn boost the country’s export as goods and services get cheaper it attracts

And in Jamaica’s case this is not the case. With Jamaican’s fickle tourism and vulnerable economy, the floating regime would be ideal. Moreover, if Jamaica was to implement the fixed exchange rate regime now when the exchange rate is high, there would be a deficit in trading due to the increased prices. Countries like Jamaica that has a large fiscal deficit and monetary indiscipline should consider the floating regime. Because to pursue a fixed regime it would take a long time to correct the disequilibrium. One has to consider the global change the flow of aggregate demand and supply. If Jamaica was to use the fixed rate then the central bank (BOJ) would have to open up all international reserves and maintain stability in the fixed economy. And because it would be a willingness of the central bank to trade at the fixing rate, the bank would have to have sufficient reserve of foreign currency to meet the excessive demand. If the bank doesn't have enough in reserve then the fixed rate becomes vulnerable to other currency, and when other currencies attack, depletion in the reserves and the devaluing of the fixed currency would be the result. So to conclude it would be wise for Jamaica to continue using the floating exchange rate regime. The success of either regime is measured by how able a country is to