flexible exchange rate

Floating Exchange Rate

The exchange rate in which the value of the currency is determined by the free market. That is, a currency has a floating exchange rate when its value changes constantly depending on the supply and demand for that currency, as well as the amount of the currency held in foreign reserves. An advantage to a floating exchange rate is that it tends to be more economically efficient. However, floating exchange rates tend to be more volatile depending on the particular currency. A currency with a floating exchange rate may undergo currency appreciation or currency depreciation, depending on market fluctuations. A floating exchange rate is also called a flexible exchange rate. See also: Fixed exchange rate, Crawling peg, Managed float.

flexible exchange rate

flexible exchange rate

see FLOATING EXCHANGE RATE.
References in periodicals archive ?
Thus, the Federal Reserve and other central banks operating under flexible exchange rate regimes still have the tools required to implement monetary policy, even if the more global environment adds some uncertainty about the multiplier effects of these tools.
The point that most concerned later critics, variability or instability, is dismissed very early with a claim that exchange rate instability reflects instability in the economy and is not a property of the flexible exchange rate system.
The much-discussed increase in the variability of real exchange rates in a flexible exchange rate regime may reflect only that flexible exchange rates change more frequently, whereas the relative price ratios are not much affected by the change in regime.
I shall discuss, in turn, traditional elements in the fixed versus flexible exchange rate debate, the idea of "currency substitution" which lies at the heart of its modern version, and the relevance of the so-called "legal restrictions" approach to monetary theory.
The build-up in international reserves and a more flexible exchange rate confer greater policy flexibility to manage shocks.
While the local currency, the peso, has posted more recent gains versus the US dollar, Espenilla said the BSP will continue to pursue a flexible exchange rate as its first line of defense against potential shocks in the foreign exchange market this year.
We welcome the CBE's decision to liberalise the foreign exchange system and adopt a flexible exchange rate regime.
Rice hailed Egypt's passing of the budget, approval of Value Added Tax (VAT), plan on energy subsidies, and its central bank's commitment to gradually move to a more flexible exchange rate.
Most importantly, the survey data highlights the ongoing need to move to a more flexible exchange rate system in order to achieve a market-clearing rate for the EGP," said Jean-Paul Pigat, Senior Economist at Emirates NBD.
It also said that it would adopt a more flexible exchange rate policy to help ease an acute dollar shortage that is weighing on the already struggling, import-dependent economy.

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