OPEN- ECONOMICY MACROECONOMICS
Fixed versus Flexible Exchange Regime, Determination of Exchange Rate in Free Markets:
Fixed currency exchange rate, or in other terms pegged exchange rate denotes the fixation of a currency value against any other currency or to a whole lot of other currencies. This is usually done for stabilization of the currency pegged to the other currencies. Floating Exchange Rate is the exchange rate of the currency value which is fixed by the free market. The exchange rate of a currency is variable depending upon the amount kept in foreign reserve and fluctuating demand and supply of the particular currency.