Back to Projects JOIN WHATSAPP GROUP Free PSC MCQ 4 Lakhs+ Please Write a Review Current Affairs 2018 to 2022 PYQ 1200 Q/A Part - 1 PYQ 1200 Q/A Part - 2 PYQ 1200 Q/A Part - 3 PYQ 1200 Q/A Part - 4 PYQ 1200 Q/A Part - 5
Kerala PSC Indian Economy Book Study Materials Page 419Book's First Page
ternal e tor in ndia 15.5 it was the UK which blamed the system for its from which the floating currency regime payment crisis of late 1960s. Looking at the major basically emerged. The USA and the EU loopholes in this system, the UK government are the major examples in this category. decided to switch over to the floating currency (ii) Some economies have managed but regime in 1973—the same year the IMF allowed flexible exchange rates, under which the an option to its member countries to go for either governments buy or sell its currency to of the currency systems. reduce day-to-day volatility of currency In the floating exchange rate system, a domestic fluctuations and sometimes go for currency is left free to float against a number of systematic intervention for desired foreign currencies in its foreign exchange market objectives. Canada and Japan fall in and determine its own value. Such exchange rates, this category, besides many developing are also called as market driven or based exchange countries. India too falls under this rates, which are regulated by factors such as the category which follows the dual currency demand and supply of the domestic and the regime since 1992–93 financial year.8 foreign currencies in the concerned economy. (iii) Some economies, particularly small ones, peg their currencies to a major currency manageD exchange rates or to a basket of currency in a fixed exchange rate—known as the pegging of A managed-exchange-rate system is a hybrid or currencies. At times, the peg is allowed to mixture of the fixed and flexible exchange rate glide smoothly upward or downward—a systems in which the government of the economy system which is known as gliding or attempts to affect the exchange rate directly by crawling peg. Some economies have a buying or selling foreign currencies or indirectly, hard fix of a currency board. A currency through monetary policy6 (i.e., by lowering or board is working well in Hong Kong raising interest rates on foreign currency bank while the same failed in Argentina in accounts, affecting foreign investment, etc.). 2002. Today, most of the economies have shifted to this system of exchange rate determination. foreign exchange market Almost all countries tend to intervene when the markets become disorderly or the fundamentals The market where different currencies can be of economics are challenged by the exchange rate bought and sold is called the foreign exchange of the time. Some of the major examples of the market.9 Out of the trades in different currencies, managed exchange-rate system have been given the exchange rate of the currency is determined by below:7 the economy.10 This is an institutional framework (i) Some countries allow to free float their for the exchange of one national currency for currencies and allow the market forces to another.11 This is particularly correct either in the determine their exchange rate with rare case of a free float exchange (i.e., floating currency) government intervention. This is the idea regime or is a managed or hybrid exchange rate 8. Ministry of Finance, LERMS, Union Budget 1992–93, 6. Ibid., p. 615. (New Delhi: Government of India, 1992). 7. The discussion is based primarily on Samuelson and 9. Stiglitz and Walsh, Economics, p. 757. Nordhaus, Economics, 613–15 and D. Salvatore, International Economics (New Jersey: John Wiley 10. Samuelson and Nordhaus, Economics, p. 604 and Sons, 2004) pp. 717–22. 11. D. Salvatore, International Economics, p. 7.