Currency pegging

1. NIJIL C V
WELCOME

2. CURRENCY PEGGING
 Currency pegging is the idea of fixing the exchange
rate of a currency by matching it’s value to the value of
another single currency or to a basket of other
currencies, or to another measure of value, such as
gold or silver.
 Pegging a currency to another currency facilitates
trade and investments between the two countries,
and is especially useful for small economies where
external trade forms a large part of their GDP.

3.  Pegging is also used as a means to control inflation.
 Currency pegs allow importers and exporters to know
exactly what kind of exchange rate they can expect for
their transactions, simplifying trade.
 This in turn helps to curb inflation and temper
interest rates, thus allowing for increased trade.
 A fixed exchange rate is usually used to stabilize the
value of a currency, with respect to the currency .

4. ADVANTAGES AND DISADVANTAGES OF
CURRENCY PEGGING

5. Advantages
1. Promotes International Trade
2. Promotes International Investment
3. Keep inflation under control
4. Removes Speculation
5. Necessary for Developing Countries
6. Not permanently fixed

6. Disadvantages
1.Not a genuinely fixed
2.Monetary Dependence

7. FLOATING EXCHANGE RATES
 A floating exchange rate or fluctuating exchange
rate is a type of exchange rate regime wherein a
currency's value is allowed to fluctuate according to
the foreign exchange market.
 A currency that uses a floating exchange rate is
known as a floating currency. A floating currency is
contrasted with a fixed currency.

8. ADVANTAGES AND DISADVANTAGES OF
FLOATING EXCHANGE RATE

9. Advantages
1. No need for international management of exchange
rates
2. No need for frequent central bank intervention
3. Greater insulation from other countries’ economic
problems

10. Disadvantages
 Higher volatility
 Use of scarce resources to predict exchange rates
 Tendency to worsen existing problems

11. TYPES OF FLOATING EXCHANGE
RATE
 Free float :The exchange rate is said to be freely
floating when its movement are totally determined by
the marketing
 Managed float :The exchange rate do note depend on
the market, but there is intervention by either the
government or central bank

12. THANK YOU