Exchange Rate Policy

Exchange rate policy refers to the strategy a country uses to manage the value of its currency in relation to others. It can be achieved through fixed rates, where the currency’s value is tied to another currency (like the US dollar), or floating rates, where the value fluctuates based on market forces. Central banks may intervene to stabilize the currency or influence economic conditions. A well-managed exchange rate can help control inflation, boost exports, and maintain economic stability, while poor management can lead to economic challenges like excessive inflation or trade deficits.