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General principles about the working of fixed exchange rate systems and flexible exchange rate systems

In: The International Monetary System and the Theory of Monetary Systems

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Abstract

Under flexible exchange rate regimes, monetary policy in a country is independent from monetary policies of other countries and the exchange rate adjusts to the differences between monetary policies (the exchange rate is endogenous). Under fixed exchange rate regimes, the exchange rate is, by definition, exogenous and adjustments are made by changes in the quantity of money. Monetary policy cannot be decided independently.

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  • ., 2016. "General principles about the working of fixed exchange rate systems and flexible exchange rate systems," Chapters, in: The International Monetary System and the Theory of Monetary Systems, chapter 14, pages 124-127, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:17285_14
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    Economics and Finance;

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