Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Find a Job
  • Tutoring
  • Home
  • Economics, Finance, & Analytics
  • Economic Analysis & Monetary Policy

Exchange Rate Policy

What is an Exchange Rate Policy?

Written by Jason Gordon

Updated at March 29th, 2023

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

What is an Exchange Rate Policy?

Exchange rate policies come in a range of different forms. Let the foreign exchange market determine the exchange rate; let the market set the value of the exchange rate most of the time, but have the central bank sometimes intervene to prevent fluctuations that seem too large; have the central bank guarantee a specific exchange rate; or share a currency with other countries. Let’s discuss each type of exchange rate policy and its tradeoffs.

A nation may adopt one of a variety of exchange rate regimes, from floating rates in which the foreign exchange market determines the rates to pegged rates where governments intervene to manage the exchange rate's value, to a common currency where the nation adopts another country or group of countries' currency.

Back to: ECONOMIC ANALYSIS & MONETARY POLICY

Related Topics

  • What Does it Mean to Dollarize
  • Foreign Exchange Market
  • Who Demands and Supplies Currency in a Foreign Exchange Market? 
  • Foreign Direct Investment
  • Greenfield Investment
  • Brownfield Investment
  • Portfolio Investment
  • Hedging
  • Dealers in the Interbank Market
  • Weak and Strong Currency
  • Depreciation of Currency 
  • Appreciating and Depreciating Currency
  • Exchange Rate
  • Real Effective Exchange Rate (REER)
  • Limited Flexibility Exchange Rate System
  • Expectations about Future Exchange Rates Shift Demand
  • Expected rate of return shift demand and supply for a currency
  • Relative Inflation Shifts Demand and Supply for a Currency
  • Purchasing Power Parity (PPP)
  • Relative Purchasing Power Parity
  • Law of One Price
  • Burgernomics
  • Balassa-Samuelson Effect
  • Arbitrage
  • Tobin Tax
  • Foreign Exchange Market
  • Foreign Exchange Contract
  • Arbitrage
  • Hedge
  • Why Central Banks Care About Exchange Rates
  • How Do Exchange Rates Affect Aggregate Demand and Aggregate Supply? 
  • What Causes Exchange Rate Fluctuations?
  • Exchange Rate Policy
  • Fixed Exchange Rate 
  • Floating Exchange Rate
  • Hard and Soft Peg
  • What is a Merged Currency?
  • Capital Control
  • Exchange Stabilization Fund
exchange rate policy exchange rate

Was this article helpful?

Yes
No

Related Articles

  • Law of Diminishing Returns
  • Fed Balance Sheet - Explained
  • Circular Flow Model- Explained
  • Depreciation (Currency) - Explained



©2011-2023. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand