Characteristics Fixed Exchange Rate
In fixed exchange rate system exchange rate is fixed by the
government in relation to other currencies. Rate may be fixed against a
dominant currency like USD or a bucket of currency.
1.
Controlled System
Fixed exchange rate system is controlled by the government
and not by the market forces. However government does consider the market
condition while fixing the rate under this system.
2.
Stability
This system offers high degree of stability because the
exchange rate is fully controlled by government.
3.
Strict Exchange Control
This system works under the strict exchange control.
4.
Periodical Change
Fixed systems do not mean that rate are fixed forever, the
rate are periodical change by the regulator keeping in view the market demand
and other factors.
5.
Parallel Market
Because the rate is not controlled by the market forces
therefore there is fair chance of developing a parallel market and advantages
of this system may be at stake.
