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Q. Why Study Fixed Exchange Rates?
Answer: Four main reasons:
• Managed Floating - Current monetary system is hybrid of floating rate and pure fixed systems fixed exchange rates give insight to effects of foreign exchange intervention under floating rates.
• Regional Currency Arrangements - Exchange rate unions subsist where member nations fix mutual exchange rates.
• Developing Countries and Countries in Transition- Almost half the world connect in currency pegging.
• Lessons of Past - Fixed exchange rates were the standard in several historical periods many economists propose resurrection of some fixed rate system.
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