August 1971 marked the end of fixed exchange rates and convertible currencies. Although exchange rates since 1973 are described as a floating system, central banks often intervene to obtain desirable exchange rates. Some countries let their currencies to float freely, while others maintain a fixed value (peg) relative to a single currency and others peg to a basket of currencies. Opinion is mixed on the desirability of floating or fixed exchange rates: Countries choose fixed or floating exchange rates depending upon several factors In summary, an exchange regime is to be preferred to anather if
More policy instruments are available
These instruments have more powerful effects on the target variables
There is greater certainty attaching to the effects of each instrument.
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