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Discuss the Various Factors That Determine the Exchange Rate Regime.


Submitted By matatajimmy
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Due date; 15th October, 2012

Question Two

Discuss the various factors that determine the exchange rate regime.


This paper is an attempt to discuss various factors which determine the exchange regime in relation to the international trade. The paper will provide a brief overview of the exchange rate regimes in the international trade, define key terms. It will also explore the various types of exchange rate regime practiced in the international and finally it will delineate the main factors that determine the exchange rate regime.

Overview of exchange rate in the International trade.

The choice of an appropriate exchange rate regime for developing countries has been at the center of the debate in international finance for a long time. The steady increase in magnitude and variability of international capital flows has intensified the debate in the past few years as each of the major currency crises in the 1990s has in some way involved a fixed exchange rate and sudden reversal of capital inflows. While the debate continues, there are areas where some consensus is emerging, and there are valuable lessons from earlier experience for developing countries. Selection of an exchange rate regime that is most likely to suit a country’s economic interest would depend on a variety of factors as discussed bellow (Yagci, 2001).

Definition of Key terms

Exchange Rate.
Exchange rate refers to the value of one

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