Exchange Rate Systems

Exchange rate systems refer to how countries manage the value of their currencies in relation to others. There are mainly three types: fixed, where a currency's value is tied to another; floating, where the value fluctuates based on market forces; and managed, which is a mix of both, where a currency can float but the government intervenes to stabilize it. These systems impact international trade, investment, and economic stability, influencing how much a currency can buy in global markets.