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fixed exchange rate
An exchange rate that is officially controlled by the issuing country rather than determined by the world currency market conditions. (Compare floating exchange rate.)
[Chapter:] Business and Economics
| The American Heritage® New Dictionary of Cultural Literacy, Third Edition Copyright © 2005 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. |
Fixed exchange rate
To learn more about Fixed exchange rate visit Britannica.com
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Fixed Exchange Rate
A country's exchange rate regime under which the government or central bank ties the official exchange rate to another country's currency (or the price of gold). The purpose of a fixed exchange rate system is to maintain a country's currency value within a very narrow band. Also known as pegged exchange rate.
Investopedia Commentary
Fixed rates provide greater certainty for exporters and importers. This also helps the government maintain low inflation, which in the long run should keep interest rates down and stimulate increased trade and investment.
Related Links
Floating And Fixed Exchange Rates
Dollarization Explained
What Is The International Monetary Fund?
See also: Bretton Woods Agreement, Central Bank, Currency, Export, Import, Inflation, Interest Rate, Trade
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fixed exchange rate
- An exchange rate between currencies that is set by the governments involved rather than being allowed to fluctuate freely with market forces. In order to keepcurrencies trading at the prescribed levels, government monetary authorities actively enter the currency markets to buy and sell according to variations in supply and demand. Compare
| Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. |
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