Floating Exchange Rate Regime

Quader, Syed Manzur (2004): Floating Exchange Rate Regime. Published in: The South Asian Journal No. 23 (2009)

Abstract

In recent years, many developing countries having a history of high inflation, unfavorable balance of payment situation and a high level of foreign currencies denominated debt, have switched or are in the process of switching to a more flexible exchange rate regime. Therefore, the stability of the exchange rate and the dynamics of its volatility are more crucial than before to prevent financial crises and macroeconomic disturbances. This paper is designed to find out the reasons behind Bangladesh’s exit to floating exchange rate system and evaluate its performance under the new regime. It’s found that, the shift to market based floating exchange rate for the Taka was a major step towards protecting the country’s external competitiveness and insulating the country from adverse external shocks. The comparisons of selected economic indicators during the first three year’s experience under the new regime showed an impressive effect on the economy of Bangladesh specially export growth, low volatility of exchange rate, towering foreign exchange reserve etc.

• Item Type: MPRA Paper
• Language: English
• Keywords: Floating exchange rate, foreign currency liquidity, trade openness, exchange rate volatility, inflation
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems ; Standards ; Regimes ; Government and the Monetary System ; Payment Systems; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E65 - Studies of Particular Policy Episodes; F - International Economics > F3 - International Finance > F31 - Foreign Exchange

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