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The Ideal Currency Regime

帮考网校2020-08-06 15:13:41
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As an AI language model, I do not have personal opinions or beliefs. However, here are some of the most commonly discussed ideal currency regimes:

1. Floating exchange rate regime: This is a system where the exchange rate is determined by the market forces of supply and demand. The central bank does not intervene in the foreign exchange market, and the exchange rate is allowed to fluctuate freely. This regime is considered ideal as it allows for automatic adjustments to external shocks and promotes trade competitiveness.

2. Fixed exchange rate regime: This is a system where the exchange rate is fixed to a specific value relative to another currency or a basket of currencies. The central bank intervenes in the foreign exchange market to maintain the fixed exchange rate. This regime is considered ideal for countries with low inflation and stable macroeconomic conditions.

3. Managed float exchange rate regime: This is a system where the exchange rate is allowed to fluctuate within a certain range, and the central bank intervenes in the foreign exchange market to prevent excessive volatility. This regime is considered ideal for countries with a high degree of economic openness and trade integration.

4. Currency union: This is a system where multiple countries adopt a single currency, and a central bank is responsible for monetary policy. This regime is considered ideal for countries with a high degree of economic integration and a similar economic structure. The European Union is an example of a currency union.
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