Skip to main content

Fixed exchange rates

Syllabus: Describe a fixed exchange rate system involving commitment to a single fixed rate.

Definition: A Fixed Exchange Rate System is a system in which the value of a country´s currency, in relation to the value of another country (or countries) currency is maintained at a constant conversion rate through government (central bank) intervention. It can also be called a pegged exchange rate and is the opposite of a flaoting exchange rate system.

Read more: http://www.businessdictionary.com/definition/fixed-exchange-rate.html#ixzz4Dd7AaOcy

NB. If the government (central bank) decide to lower the exchange rate in a fixed exchange rate system this is called a DEVALUATION (depreciation in a floating exchange rate system) and if the exchange rate is raised this is a REVALUATION (appreciation in floating system)

Syllabus: Explain, using a diagram, how a fixed exchange rate is maintained.


If you would prefer to view this interaction in a new web window, then please follow the link below:


If you would prefer to view this interaction in a new web window, then please follow the link below: