The following procedure is observed in India for the determination of Exchange Rate:- In theory terms exchange rate determination is explained by two main models: 1. Flexible/floating exchange rate model 2. Fixed/pegged exchange model 1. Flexible Exchange Rate Model: When we treat exchange as a price of any foreign currency, then we can use the tools of demand and supply [...]
In this article we will discuss about fixed or pegged and flexible or fluctuating exchange rate system. Fixed or Pegged Exchange Rate System: In the case of fixed or pegged exchange system, all the international transactions take place at the rate of exchange fixed by the monetary authority. The exchange rate is either fixed by the government through legislation or [...]
The methods of exchange control may be classified broadly into two groups: 1. Direct Methods 2. Indirect Methods. 1. Direct Methods: The direct methods of exchange control are adopted by the central bank with the object of restricting the use and the quantity of foreign exchange. These include intervention, exchange restriction, exchange clearing agreements and payments agreements. They are briefly [...]