International Trade and PolicyPresented By:-Suvam DharMansi GoelKushaldeep GillAbhishek JainSakshi Gulati

BBA, 2ND Year, Section A, Session 2014 15Under The Supervision Of :-Dr. Megha BarejaTopics To Be Covered Exchange Rates Regimes Fixed Exchange Rates - Definition - Types Of Fixed Exchange Rates - How does it works? - Advantages and Disadvantages - Fixed Exchange RatesWe know that exchange rates are established by market forces of demand and supply. When a group of countries instead keep their exchange rate constant thus establishing a fixed exchange rate. Such countries use the central government to intervene on the foreign exchange market in order to keep exchange rate within a narrow band-much like the mechanism used in a buffer stock mechanism. The central government can affect the exchange rate in the short run by buying or selling its own currency on the foreign exchange market, and by adjusting the interest rate to influence investors demand for the currency. In the long run, governments might intervene using fiscal policies, supply-side measures and protectionism to adjust national income in order to increase or decrease exports and citizens propensity to import.

Types of Fixed Exchange RatesThe Gold StandardThe gold standard was a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold. National money and other forms of money (bank deposits and notes) were freely converted into gold at the fixed price.The Bretton Wood Exchange Rate System

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