Currency pegging is fixing a currency's exchange rate to another currency or basket of currencies. It facilitates trade between countries and helps control inflation by providing predictable exchange rates. The main advantages are promoting trade and investment by providing stability and controlling inflation. The main disadvantages are a lack of independent monetary policy and dependence on the anchored currency. Floating exchange rates fluctuate based on market forces, with the main advantages being less need for intervention and insulation from other economies. However, volatility can increase under a floating regime.

1. CURRENCY PEGGING
NIJIL C V

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
EXCHANGERATES
 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. TYPESOF
FLOATING
EXCHANGERATE
 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

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