what is the role of central bank in the following exchange rate - fixed exchange
- floating exchange
- managed floating
Dear Student,
The role of the Central Bank in maintaining the foreign exchange rates under different regimes is:
The role of the Central Bank in maintaining the foreign exchange rates under different regimes is:
a) Fixed exchange rate system: A Central Bank more often uses its foreign currency reserves to maintain the officially determined exchange rate.
b) Floating exchange rate system: A Central Bank does not maintain any reserves of foreign currency as the market automatically adjusts to determine the market driven exchange rate.
c) Managed Floating: A Central Bank enters the foreign exchange market to buy/sell foreign currency in order to control fluctuations and volatility in the market.