Present the case for floating exchange rates, International Economics

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Q. Present the case for floating exchange rates.

Answer:

1. Monetary policy autonomy

Governments would able to use financial policy to reach internal and external balance. No country possible forced to import inflation and deflation from abroad.

2.Symmetry

The United States would no longer is able to set world monetary conditions all by itself. The United States would have the similar opportunity the same as other countries to influence its exchange rate against foreign currencies.

3. Exchange rates like automatic stabilizers.

The agonizing and long periods of speculation preceding exchange rate realignments wouldn't take place under floating.


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