explain "coordination of macro policies becomes convenient" of fixed rate of exchange
Harleen,
Under the fixed exchange rate system, the exchange rate is held constant or fixed by the monetary authority of the country. Under this regime, the monetary authority of country fixes the value of currency against various other currencies. Since this exchange rate avoids frequent fluctuations in the exchange rate and makes international trade more predictable, a country can easily coordinate the import and export policies. Since changes in exchange rate do not occur frequently under this exchange rate, RBI can formulate a stable monetary policy which results in convenience of coordination of macro economic policies.
Under the fixed exchange rate system, the exchange rate is held constant or fixed by the monetary authority of the country. Under this regime, the monetary authority of country fixes the value of currency against various other currencies. Since this exchange rate avoids frequent fluctuations in the exchange rate and makes international trade more predictable, a country can easily coordinate the import and export policies. Since changes in exchange rate do not occur frequently under this exchange rate, RBI can formulate a stable monetary policy which results in convenience of coordination of macro economic policies.