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"Deregulation" and "floating the dollar"

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bec:
"In 1983, Australia's financial sector was deregulated and the Australian dollar was floated."
What does this mean? It's for international studies so I don't need any intense eco explanations, but if someone could give me a quick overview that would be great.
Thanks!

marbs:
Deregulation meant they removed or reduced barriers inhibiting efficiency, and aimed to increase participation, increase competition and increase supply, which will make the country more internationally competitive.


The dollar was floated which meant it would now react to the market forces of demand and supply. This means if more is demanded, the rate will increase. Floating replaced the Aus exchange rate being tied to another countries exchange rate.

costargh:
Deregulation in simple terms means that there was less government control over the actions of financial institutions.

Floating the dollar means that the value of the Australian dollar compared to other currencies was made to be valued relative to forces of the market. I.e. when there was lots of demand for australian goods and services, foreign countries need to pay in Austrralian dollars. Because the supply of Australian currency is limited, and demand has increased, the value of the dollar increases.

Before the dollar was floated, it was a fixed price set by the RBA (i believe)

damn marbs beat me to it. lol hope its hellpful anyways

bec:
Thanks, that's very helpful. I just realised I think I've learnt about floating the dollar before - did Thailand float the bhat in the Asian Eco Crisis?

brendan:

--- Quote from: costargh on October 16, 2008, 08:23:01 pm ---Before the dollar was floated, it was a fixed price set by the RBA (i believe)

--- End quote ---

Before the dollar was floated, the RBA intervened very heavily by buying and selling Australian dollars so that the market price would equal the peg.

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