EXCHANGE RATE - REGIMES AND POLICIES

Abstract

Exchange rate of one currency is the
price of the currency expressed in units of other
currency. It is formed by the interaction of supply and
demand in the foreign exchange market. Given that
the exchange rate has a direct impact on the
competitiveness of a country in terms of features of its
exports and imports, in its balance of payments, and
indirectly the overall economic and social
development, in addition to acting in market
principles - supply and demand in the formation of
the equilibrium exchange rate, exchange rate is
subject to different, stronger or weaker, more or less,
forms of intervention. In the search for the optimal
exchange rate policy of the national currency, the
monetary authorities are positioned between the two
extremes - the complete abandonment of the
exchange rate to the market laws of supply and
demand, or fixing the exchange rate for any of the
selected anchor currency.