supply and demand in the foreign exchange market

Exchange rate regime

The term is synonymous with the term as the exchange rate system to be considered. The exchange rates of those currencies which are subject to the same system of exchange rate policies are known as exchange rate regime.

Basically there are two completely different systems: either the exchange rate is free (flexible mode) or it is set by the central bank (fixed mode). In the flexible version of the exchange rate as a result of a combination of supply and demand in the foreign exchange market should be considered. Fixed exchange rates are characterized, however the fact that the currency of certain reference level - this may be a currency like the dollar or the euro, but also as the price of gold - "bound" and "floating" with this.

Besides these two "extremes", but there are also a number of distinct and intermediate forms. to mention in this context, for example, crawling peg, Adjusted Peg, and managed floating rate fixation. The rule is often cited is the claim that the system should be more fixed, the closer two separate economies in real economic terms are related to each other.