ATAR Notes: Forum

HSC Stuff => HSC Humanities Stuff => HSC Subjects + Help => HSC Economics => Topic started by: ilikeapples on November 02, 2018, 11:50:45 am

Title: Fixed and Managed Exchange Rates
Post by: ilikeapples on November 02, 2018, 11:50:45 am

Hi could someone please explain the difference between a fixed and managed exchange rate system as they sound very similar as described in the textbook, Thankyou!

Title: Re: Fixed and Managed Exchange Rates
Post by: JTrudeau on November 02, 2018, 11:59:15 am

Hey there! A fixed exchange rate is a set exchange rate relative to another country’s currency (e.g. USD) or the TWI.
A managed exchange rate is a range of exchange rates acceptable relative to another country’s currency of the TWI.

So e.g. China can have a fixed exchange rate of 0.80 USD (nothing more, nothing less), or they can have a managed exchange rate of between 0.75-0.85 USD (where they can fluctuate freely due to demand and supply as long as it stays in that range).

So yes, they are pretty similar, but there’s that slight distinction :)