International Trade and Policy

Presented
By:ND
BBA,
2
Year, Section
Suvam Dhar
A, Session 2014
Mansi Goel
15
Kushaldeep
Gill
Abhishek Jain
UnderGulati
The Supervision Of :Sakshi
Dr. Megha Bareja

Topics To Be Covered
Exchange Rates Regimes
Fixed Exchange Rates
- Definition
- Types Of Fixed Exchange Rates
- How does it works?
- Advantages and Disadvantages
-

Fixed Exchange Rates

We know that exchange rates are established by market forces of demand and
supply. When a group of countries instead keep their exchange rate constant
thus establishing a fixed exchange rate.

Such countries use the central government to intervene on the foreign exchange
market in order to keep exchange rate within a narrow band-much like the
mechanism used in a buffer stock mechanism.

The central government can affect the exchange rate in the short run by buying
or selling its own currency on the foreign exchange market, and by adjusting the
interest rate to influence investors demand for the currency.

In the long run, governments might intervene using fiscal policies, supply-side
measures and protectionism to adjust national income in order to increase or
decrease exports and citizens propensity to import.

Types of Fixed Exchange Rates

The Gold Standard

The gold standard was a commitment by participating

countries to fix the prices of their domestic currencies in terms
of a specified amount of gold. National money and other forms
of money (bank deposits and notes) were freely converted into
gold at the fixed price.

The Bretton Wood Exchange Rate System

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