HOME

TheInfoList



OR:

A fixed exchange rate, often called a pegged exchange rate, is a type of
exchange rate regime An exchange rate regime is a way a monetary authority of a country or currency union manages the currency about other currencies and the foreign exchange market. It is closely related to monetary policy and the two are generally dependent on many ...
in which a
currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general ...
's value is fixed or pegged by a
monetary authority In finance and economics, a monetary authority is the entity that manages a country’s currency and money supply, often with the objective of controlling inflation, interest rates, real GDP or unemployment rate. With its monetary tools, a m ...
against the value of another currency, a basket of other currencies, or another measure of value, such as
gold Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile ...
. There are benefits and risks to using a fixed exchange rate system. A fixed exchange rate is typically used to stabilize the exchange rate of a currency by directly fixing its value in a predetermined ratio to a different, more stable, or more internationally prevalent currency (or currencies) to which the currency is pegged. In doing so, the exchange rate between the currency and its peg does not change based on market conditions, unlike in a floating (flexible) exchange regime. This makes trade and investments between the two currency areas easier and more predictable and is especially useful for small economies that borrow primarily in foreign currency and in which external trade forms a large part of their GDP. A fixed exchange rate system can also be used to control the behavior of a currency, such as by limiting rates of
inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...
. However, in doing so, the pegged currency is then controlled by its reference value. As such, when the reference value rises or falls, it then follows that the value(s) of any currencies pegged to it will also rise and fall in relation to other currencies and commodities with which the pegged currency can be traded. In other words, a pegged currency is dependent on its reference value to dictate how its current worth is defined at any given time. In addition, according to the Mundell–Fleming model, with perfect
capital Capital may refer to: Common uses * Capital city, a municipality of primary status ** List of national capital cities * Capital letter, an upper-case letter Economics and social sciences * Capital (economics), the durable produced goods used fo ...
mobility, a fixed exchange rate prevents a government from using domestic
monetary policy Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for federal funds, very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money s ...
to achieve
macroeconomic Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole. For example, using interest rates, taxes, an ...
stability. In a fixed exchange rate system, a country's
central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a centra ...
typically uses an open market mechanism and is committed at all times to buy and/or sell its currency at a fixed price in order to maintain its pegged ratio and, hence, the stable value of its currency in relation to the reference to which it is pegged. To maintain a desired exchange rate, the central bank during a time of private sector net demand for the foreign currency, sells foreign currency from its reserves and buys back the domestic money. This creates an artificial
demand In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given time. The relationship between price and quantity demand is also called the demand curve. Demand for a specific item ...
for the domestic money, which increases its exchange rate value. Conversely, in the case of an incipient appreciation of the domestic money, the central bank buys back the foreign money and thus adds domestic money into the market, thereby maintaining market equilibrium at the intended fixed value of the exchange rate. In the 21st century, the currencies associated with large economies typically do not fix (peg) their exchange rates to other currencies. The last large economy to use a fixed exchange rate system was the
People's Republic of China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's List of countries and dependencies by population, most populous country, with a Population of China, population exceeding 1.4 billion, slig ...
, which, in July 2005, adopted a slightly more flexible exchange rate system, called a managed exchange rate. The
European Exchange Rate Mechanism The European Exchange Rate Mechanism (ERM II) is a system introduced by the European Economic Community on 1 January 1999 alongside the introduction of a single currency, the euro (replacing ERM 1 and the euro's predecessor, the ECU) as ...
is also used on a temporary basis to establish a final conversion rate against the
euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...
from the local currencies of countries joining the
Eurozone The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU pol ...
.


History

The
gold standard A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from th ...
or gold exchange standard of fixed
exchange rate In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of t ...
s prevailed from about 1870 to 1914, before which many countries followed
bimetallism Bimetallism, also known as the bimetallic standard, is a monetary standard in which the value of the monetary unit is defined as equivalent to certain quantities of two metals, typically gold and silver, creating a fixed rate of exchange betw ...
. The period between the two world wars was transitory, with the
Bretton Woods system The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Bretto ...
emerging as the new fixed exchange rate regime in the aftermath of World War II. It was formed with an intent to rebuild war-ravaged nations after World War II through a series of currency stabilization programs and
infrastructure Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and priv ...
loans. The early 1970s saw the breakdown of the system and its replacement by a mixture of fluctuating and fixed exchange rates.


Chronology

Timeline of the fixed exchange rate system:


Gold standard

The earliest establishment of a gold standard was in the United Kingdom in 1821 followed by Australia in 1852 and Canada in 1853. Under this system, the external value of all currencies was denominated in terms of gold with central banks ready to buy and sell unlimited quantities of gold at the fixed price. Each central bank maintained
gold reserves A gold reserve is the gold held by a national central bank, intended mainly as a guarantee to redeem promises to pay depositors, note holders (e.g. paper money), or trading peers, during the eras of the gold standard, and also as a store of v ...
as their official reserve asset. For example, during the "classical" gold standard period (1879–1914), the U.S. dollar was defined as 0.048 troy oz. of pure gold.


Bretton Woods system

Following the Second World War, the
Bretton Woods system The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Bretto ...
(1944–1973) replaced gold with the U.S. dollar as the official reserve asset. The regime intended to combine binding legal obligations with multilateral decision-making through the
International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...
(IMF). The rules of this system were set forth in the articles of agreement of the IMF and the
International Bank for Reconstruction and Development The International Bank for Reconstruction and Development (IBRD) is an international financial institution, established in 1944 and headquartered in Washington, D.C., United States, that is the lending arm of World Bank Group. The IBRD offers ...
. The system was a monetary order intended to govern currency relations among sovereign states, with the 44 member countries required to establish a parity of their national currencies in terms of the U.S. dollar and to maintain exchange rates within 1% of parity (a " band") by intervening in their
foreign exchange market The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all as ...
s (that is, buying or selling foreign money). The U.S. dollar was the only currency strong enough to meet the rising demands for international currency transactions, and so the United States agreed both to link the dollar to gold at the rate of $35 per ounce of gold and to convert dollars into gold at that price. Due to concerns about America's rapidly deteriorating payments situation and massive flight of liquid capital from the U.S., President
Richard Nixon Richard Milhous Nixon (January 9, 1913April 22, 1994) was the 37th president of the United States, serving from 1969 to 1974. A member of the Republican Party, he previously served as a representative and senator from California and was ...
suspended the convertibility of the dollar into gold on 15 August 1971. In December 1971, the
Smithsonian Agreement The Smithsonian Agreement, announced in December 1971, created a new dollar standard, whereby the currencies of a number of industrialized states were pegged to the US dollar. These currencies were allowed to fluctuate by 2.25% against the dol ...
paved the way for the increase in the value of the dollar price of gold from US$35.50 to US$38 an ounce. Speculation against the dollar in March 1973 led to the birth of the independent float, thus effectively terminating the Bretton Woods system.


Current monetary regimes

Since March 1973, the
floating exchange rate In macroeconomics and economic policy, a floating exchange rate (also known as a fluctuating or flexible exchange rate) is a type of exchange rate regime in which a currency's value is allowed to fluctuate in response to foreign exchange ma ...
has been followed and formally recognized by the Jamaica accord of 1978. Countries use
foreign exchange reserves Foreign exchange reserves (also called forex reserves or FX reserves) are cash and other reserve assets such as gold held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence ...
to intervene in
foreign exchange market The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all as ...
s to balance short-run fluctuations in exchange rates. The prevailing exchange rate regime is often considered a revival of Bretton Woods policies, namely Bretton Woods II.


Mechanisms


Open market trading

Typically, a government wanting to maintain a fixed exchange rate does so by either buying or selling its own currency on the open market. This is one reason governments maintain reserves of foreign currencies. If the exchange rate drifts too far above the fixed benchmark rate (it is stronger than required), the government sells its own currency (which increases supply) and buys foreign currency. This causes the price of the currency to decrease in value (Read: Classical Demand-Supply diagrams). Also, if they buy the currency it is pegged to, then the price of that currency will increase, causing the relative value of the currencies to approach what is intended. If the exchange rate drifts too far below the desired rate, the government buys its own currency in the market by selling its reserves. This places greater demand on the market and causes the local currency to become stronger, hopefully back to its intended value. The reserves they sell may be the currency it is pegged to, in which case the value of that currency will fall.


Fiat

Another, less used means of maintaining a fixed exchange rate is by simply making it illegal to trade currency at any other rate. This is difficult to enforce and often leads to a
black market A black market, underground economy, or shadow economy is a clandestine market or series of transactions that has some aspect of illegality or is characterized by noncompliance with an institutional set of rules. If the rule defines the ...
in foreign currency. Nonetheless, some countries are highly successful at using this method due to government monopolies over all money conversion. This was the method employed by the Chinese government to maintain a currency peg or tightly banded float against the US dollar. China buys an average of one billion US dollars a day to maintain the currency peg. Throughout the 1990s, China was highly successful at maintaining a currency peg using a government monopoly over all currency conversion between the yuan and other currencies.


Open market mechanism example

Under this system, the central bank first announces a fixed exchange-rate for the currency and then agrees to buy and sell the domestic currency at this value. The
market equilibrium In economics, economic equilibrium is a situation in which economic forces such as supply and demand are balanced and in the absence of external influences the ( equilibrium) values of economic variables will not change. For example, in the st ...
exchange rate is the rate at which supply and demand will be equal, i.e., markets will clear. In a flexible exchange rate system, this is the spot rate. In a fixed exchange-rate system, the pre-announced rate may not coincide with the market equilibrium exchange rate. The foreign central banks maintain reserves of foreign currencies and gold which they can sell in order to intervene in the foreign exchange market to make up the excess demand or take up the excess supply The demand for foreign exchange is derived from the domestic demand for foreign
goods In economics, goods are items that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods which are transferable, and services, which are not ...
, services, and financial
assets In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can ...
. The supply of foreign exchange is similarly derived from the foreign demand for goods, services, and financial assets coming from the home country. Fixed exchange-rates are not permitted to fluctuate freely or respond to daily changes in demand and supply. The government fixes the exchange value of the currency. For example, the
European Central Bank The European Central Bank (ECB) is the prime component of the monetary Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's most important centra ...
(ECB) may fix its exchange rate at €1 = $1 (assuming that the euro follows the fixed exchange-rate). This is the central value or
par value Par value, in finance and accounting, means stated value or face value. From this come the expressions at par (at the par value), over par (over par value) and under par (under par value). Bonds A bond selling at par is priced at 100% of face valu ...
of the euro. Upper and lower limits for the movement of the currency are imposed, beyond which variations in the exchange rate are not permitted. The "band" or "spread" in Fig.1 is €0.6 (from €1.2 to €1.8).


Excess demand for dollars

Fig.2 describes the excess demand for dollars. This is a situation where domestic demand for foreign goods, services, and financial assets exceeds the foreign demand for goods, services, and financial assets from the
European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are located primarily in Europe, Europe. The union has a total area of ...
. If the demand for dollar rises from DD to D'D', excess demand is created to the extent of ''cd''. The ECB will sell ''cd'' dollars in exchange for euros to maintain the limit within the band. Under a floating exchange rate system, equilibrium would have been achieved at ''e''. When the ECB sells dollars in this manner, its official dollar reserves decline and domestic
money supply In macroeconomics, the money supply (or money stock) refers to the total volume of currency held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include currency in circu ...
shrinks. To prevent this, the ECB may purchase
government bonds A government bond or sovereign bond is a form of bond issued by a government to support public spending. It generally includes a commitment to pay periodic interest, called coupon payments'','' and to repay the face value on the maturity dat ...
and thus meet the shortfall in money supply. This is called sterilized intervention in the foreign exchange market. When the ECB starts running out of reserves, it may also devalue the euro in order to reduce the excess demand for dollars, i.e., narrow the gap between the equilibrium and fixed rates.


Excess supply of dollars

Fig.3 describes the excess supply of dollars. This is a situation where the foreign demand for goods, services, and financial assets from the European Union exceeds the European demand for foreign goods, services, and financial assets. If the supply of dollars rises from SS to S'S', excess supply is created to the extent of ''ab''. The ECB will buy ''ab'' dollars in exchange for euros to maintain the limit within the band. Under a floating exchange rate system, equilibrium would again have been achieved at ''e''. When the ECB buys dollars in this manner, its official dollar reserves increase and domestic
money supply In macroeconomics, the money supply (or money stock) refers to the total volume of currency held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include currency in circu ...
expands, which may lead to inflation. To prevent this, the ECB may sell government bonds and thus counter the rise in money supply. When the ECB starts accumulating excess reserves, it may also revalue the euro in order to reduce the excess supply of dollars, i.e., narrow the gap between the equilibrium and fixed rates. This is the opposite of
devaluation In macroeconomics and modern monetary policy, a devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system, in which a monetary authority formally sets a lower exchange rate of the national curre ...
.


Types of fixed exchange rate systems


The gold standard

Under the gold standard, a country's government declares that it will exchange its currency for a certain weight in gold. In a pure gold standard, a country's government declares that it will freely exchange currency for actual gold at the designated exchange rate. This "rule of exchange” allows anyone to enter the central bank and exchange coins or currency for pure gold or vice versa. The gold standard works on the assumption that there are no restrictions on capital movements or export of gold by private citizens across countries. Because the central bank must always be prepared to give out gold in exchange for coin and currency upon demand, it must maintain gold reserves. Thus, this system ensures that the exchange rate between currencies remains fixed. For example, under this standard, a £1 gold coin in the United Kingdom contained 113.0016 grains of pure gold, while a gold coin in the United States contained 23.22 grains. The mint parity or the exchange rate was thus: R = $/£ = 113.0016/23.22 = 4.87. The main argument in favor of the gold standard is that it ties the world price level to the world supply of gold, thus preventing inflation unless there is a gold discovery (a
gold rush A gold rush or gold fever is a discovery of gold—sometimes accompanied by other precious metals and rare-earth minerals—that brings an onrush of miners seeking their fortune. Major gold rushes took place in the 19th century in Australia, New ...
, for example).


Price specie flow mechanism

The automatic adjustment mechanism under the gold standard is the price specie flow mechanism, which operates so as to correct any balance of payments disequilibrium and adjust to shocks or changes. This mechanism was originally introduced by
Richard Cantillon Richard Cantillon (; 1680s – ) was an Irish-French economist and author of '' Essai Sur La Nature Du Commerce En Général'' (''Essay on the Nature of Trade in General''), a book considered by William Stanley Jevons to be the "cradle of p ...
and later discussed by
David Hume David Hume (; born David Home; 7 May 1711 NS (26 April 1711 OS) – 25 August 1776) Cranston, Maurice, and Thomas Edmund Jessop. 2020 999br>David Hume" '' Encyclopædia Britannica''. Retrieved 18 May 2020. was a Scottish Enlightenment ph ...
in 1752 to refute the
mercantilist Mercantilism is an economic policy that is designed to maximize the exports and minimize the imports for an economy. It promotes imperialism, colonialism, tariffs and subsidies on traded goods to achieve that goal. The policy aims to reduc ...
doctrines and emphasize that nations could not continuously accumulate gold by exporting more than their imports. The assumptions of this mechanism are: # Prices are flexible # All transactions take place in gold # There is a fixed supply of gold in the world # Gold coins are minted at a fixed parity in each country # There are no banks and no capital flows Adjustment under a gold standard involves the flow of gold between countries resulting in equalization of prices satisfying
purchasing power parity Purchasing power parity (PPP) is the measurement of prices in different countries that uses the prices of specific goods to compare the absolute purchasing power of the countries' currencies. PPP is effectively the ratio of the price of a bask ...
, and/or equalization of rates of return on assets satisfying
interest rate parity Interest rate parity is a no-arbitrage condition representing an equilibrium state under which investors interest rates available on bank deposits in two countries. The fact that this condition does not always hold allows for potential opportuniti ...
at the current fixed exchange rate. Under the gold standard, each country's money supply consisted of either gold or paper currency backed by gold. Money supply would hence fall in the deficit nation and rise in the surplus nation. Consequently, internal prices would fall in the deficit nation and rise in the
surplus Surplus may refer to: * Economic surplus, one of various supplementary values * Excess supply, a situation in which the quantity of a good or service supplied is more than the quantity demanded, and the price is above the equilibrium level determ ...
nation, making the exports of the deficit nation more competitive than those of the surplus nations. The deficit nation's exports would be encouraged and the imports would be discouraged till the deficit in the balance of payments was eliminated.


Reserve currency standard

In a reserve currency system, the currency of another country performs the functions that gold has in a gold standard. A country fixes its own currency value to a unit of another country's currency, generally a currency that is prominently used in international transactions or is the currency of a major trading partner. For example, suppose India decided to fix its currency to the dollar at the exchange rate E₹/$ = 45.0. To maintain this fixed exchange rate, the
Reserve Bank of India The Reserve Bank of India, chiefly known as RBI, is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible f ...
would need to hold dollars on reserve and stand ready to exchange rupees for dollars (or dollars for rupees) on demand at the specified exchange rate. In the gold standard the central bank held gold to exchange for ''its own currency'', with a reserve currency standard it must hold a stock of the ''reserve currency''.
Currency board In public finance, a currency board is a monetary authority which is required to maintain a fixed exchange rate with a foreign currency. This policy objective requires the conventional objectives of a central bank to be subordinated to the exch ...
arrangements are the most widespread means of fixed exchange rates. Under this, a nation rigidly pegs its currency to a foreign currency,
special drawing rights Special drawing rights (SDRs, code ) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF). SDRs are units of account for the IMF, and not a currency ''per se''. They represent a claim ...
(SDR) or a basket of currencies. The central bank's role in the country's monetary policy is therefore minimal as its money supply is equal to its foreign reserves. Currency boards are considered hard pegs as they allow central banks to cope with shocks to money demand without running out of reserves. CBAs have been operational in many nations including: *
Hong Kong Hong Kong ( (US) or (UK); , ), officially the Hong Kong Special Administrative Region of the People's Republic of China (abbr. Hong Kong SAR or HKSAR), is a List of cities in China, city and Special administrative regions of China, special ...
(since 1983); *
Argentina Argentina (), officially the Argentine Republic ( es, link=no, República Argentina), is a country in the southern half of South America. Argentina covers an area of , making it the List of South American countries by area, second-largest ...
(1991 to 2001); *
Estonia Estonia, formally the Republic of Estonia, is a country by the Baltic Sea in Northern Europe. It is bordered to the north by the Gulf of Finland across from Finland, to the west by the sea across from Sweden, to the south by Latvia, an ...
(1992 to 2010); *
Lithuania Lithuania (; lt, Lietuva ), officially the Republic of Lithuania ( lt, Lietuvos Respublika, links=no ), is a country in the Baltic region of Europe. It is one of three Baltic states and lies on the eastern shore of the Baltic Sea. Lithuania ...
(1994 to 2014); *
Bosnia and Herzegovina Bosnia and Herzegovina ( sh, / , ), abbreviated BiH () or B&H, sometimes called Bosnia–Herzegovina and often known informally as Bosnia, is a country at the crossroads of south and southeast Europe, located in the Balkans. Bosnia and ...
(since 1997); *
Bulgaria Bulgaria (; bg, България, Bǎlgariya), officially the Republic of Bulgaria,, ) is a country in Southeast Europe. It is situated on the eastern flank of the Balkans, and is bordered by Romania to the north, Serbia and North Macedo ...
(since 1997); *
Bermuda ) , anthem = "God Save the King" , song_type = National song , song = "Hail to Bermuda" , image_map = , map_caption = , image_map2 = , mapsize2 = , map_caption2 = , subdivision_type = Sovereign state , subdivision_name = , es ...
(since 1972); *
Denmark ) , song = ( en, "King Christian stood by the lofty mast") , song_type = National and royal anthem , image_map = EU-Denmark.svg , map_caption = , subdivision_type = Sovereign state , subdivision_name = Kingdom of Denmark , establish ...
(since 1945); *
Brunei Brunei ( , ), formally Brunei Darussalam ( ms, Negara Brunei Darussalam, Jawi: , ), is a country located on the north coast of the island of Borneo in Southeast Asia. Apart from its South China Sea coast, it is completely surrounded by th ...
(since 1967)


Gold exchange standard

The fixed exchange rate system set up after World War II was a gold-exchange standard, as was the system that prevailed between 1920 and the early 1930s. A gold exchange standard is a mixture of a reserve currency standard and a gold standard. Its characteristics are as follows: * All non-reserve countries agree to fix their exchange rates to the chosen reserve at some announced rate and hold a stock of reserve currency assets. * The reserve currency country fixes its currency value to a fixed weight in gold and agrees to exchange on demand its own currency for gold with other central banks within the system, upon demand. Unlike the gold standard, the central bank of the reserve country does not exchange gold for currency with the general public, only with other central banks.


Hybrid exchange rate systems

The current state of foreign exchange markets does not allow for the rigid system of fixed exchange rates. At the same time, freely floating exchange rates expose a country to volatility in exchange rates. Hybrid exchange rate systems have evolved in order to combine the characteristics features of fixed and flexible exchange rate systems. They allow fluctuation of the exchange rates without completely exposing the currency to the flexibility of a free float.


Basket-of-currencies

Countries often have several important trading partners or are apprehensive of a particular currency being too volatile over an extended period of time. They can thus choose to peg their currency to a weighted average of several currencies (also known as a
currency basket A currency basket is a portfolio of selected currencies with different weightings. A currency basket is commonly used by investors to minimize the risk of currency fluctuations and also governments when setting the market value of a country’s ...
) . For example, a composite currency may be created consisting of 100 Indian rupees, 100 Japanese yen and one Singapore dollar. The country creating this composite would then need to maintain reserves in one or more of these currencies to intervene in the foreign exchange market. A popular and widely used composite currency is the SDR, which is a composite currency created by the
International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...
(IMF), consisting of a fixed quantity of U.S. dollars, Chinese yuan, euros, Japanese yen, and British pounds.


Crawling pegs

In a crawling peg system a country fixes its exchange rate to another currency or basket of currencies. This fixed rate is changed from time to time at periodic intervals with a view to eliminating exchange rate volatility to some extent without imposing the constraint of a fixed rate. Crawling pegs are adjusted gradually, thus avoiding the need for interventions by the central bank (though it may still choose to do so in order to maintain the fixed rate in the event of excessive fluctuations).


Pegged within a band

A currency is said to be pegged within a band when the
central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a centra ...
specifies a central exchange rate with reference to a single currency, a cooperative arrangement, or a currency composite. It also specifies a percentage allowable deviation on both sides of this central rate. Depending on the band width, the central bank has discretion in carrying out its monetary policy. The band itself may be a crawling one, which implies that the central rate is adjusted periodically. Bands may be symmetrically maintained around a crawling central parity (with the band moving in the same direction as this parity does). Alternatively, the band may be allowed to widen gradually without any pre-announced central rate.


Currency boards

A
currency board In public finance, a currency board is a monetary authority which is required to maintain a fixed exchange rate with a foreign currency. This policy objective requires the conventional objectives of a central bank to be subordinated to the exch ...
(also known as 'linked exchange rate system") effectively replaces the central bank through a legislation to fix the currency to that of another country. The domestic currency remains perpetually exchangeable for the
reserve currency A reserve currency (or anchor currency) is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves. The reserve currency can be used in international tr ...
at the fixed exchange rate. As the anchor currency is now the basis for movements of the domestic currency, the interest rates and inflation in the domestic economy would be greatly influenced by those of the foreign economy to which the domestic currency is tied. The
currency board In public finance, a currency board is a monetary authority which is required to maintain a fixed exchange rate with a foreign currency. This policy objective requires the conventional objectives of a central bank to be subordinated to the exch ...
needs to ensure the maintenance of adequate reserves of the anchor currency. It is a step away from officially adopting the anchor currency (termed as
currency substitution Currency substitution is the use of a foreign currency in parallel to or instead of a domestic currency. The process is also known as dollarization or euroization when the foreign currency is the dollar or the euro, respectively. Currency subs ...
).


Currency substitution

This is the most extreme and rigid manner of fixing exchange rates as it entails adopting the currency of another country in place of its own. The most prominent example is the
eurozone The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU pol ...
, where 19
European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are located primarily in Europe, Europe. The union has a total area of ...
(EU)
member states A member state is a state that is a member of an international organization or of a federation or confederation. Since the World Trade Organization (WTO) and the International Monetary Fund (IMF) include some members that are not sovereign s ...
have adopted the euro (€) as their common currency (euroization). Their exchange rates are effectively fixed to each other. There are similar examples of countries adopting the U.S. dollar as their domestic currency (dollarization):
British Virgin Islands ) , anthem = "God Save the King" , song_type = Territorial song , song = "Oh, Beautiful Virgin Islands" , image_map = File:British Virgin Islands on the globe (Americas centered).svg , map_caption = , mapsize = 290px , image_map2 = Brit ...
,
Caribbean Netherlands ) , image_map = BES islands location map.svg , map_caption = Location of the Caribbean Netherlands (green and circled). From left to right: Bonaire, Saba, and Sint Eustatius , elevation_max_m = 887 , elevation_max_footnotes = , demographic ...
,
East Timor East Timor (), also known as Timor-Leste (), officially the Democratic Republic of Timor-Leste, is an island country in Southeast Asia. It comprises the eastern half of the island of Timor, the exclave of Oecusse on the island's north-w ...
,
Ecuador Ecuador ( ; ; Quechua: ''Ikwayur''; Shuar: ''Ecuador'' or ''Ekuatur''), officially the Republic of Ecuador ( es, República del Ecuador, which literally translates as "Republic of the Equator"; Quechua: ''Ikwadur Ripuwlika''; Shuar: ' ...
,
El Salvador El Salvador (; , meaning " The Saviour"), officially the Republic of El Salvador ( es, República de El Salvador), is a country in Central America. It is bordered on the northeast by Honduras, on the northwest by Guatemala, and on the south ...
,
Marshall Islands The Marshall Islands ( mh, Ṃajeḷ), officially the Republic of the Marshall Islands ( mh, Aolepān Aorōkin Ṃajeḷ),'' () is an independent island country and microstate near the Equator in the Pacific Ocean, slightly west of the Inte ...
,
Federated States of Micronesia The Federated States of Micronesia (; abbreviated FSM) is an island country in Oceania. It consists of four states from west to east, Yap, Chuuk, Pohnpei and Kosraethat are spread across the western Pacific. Together, the states compr ...
,
Palau Palau,, officially the Republic of Palau and historically ''Belau'', ''Palaos'' or ''Pelew'', is an island country and microstate in the western Pacific. The nation has approximately 340 islands and connects the western chain of the ...
,
Panama Panama ( , ; es, link=no, Panamá ), officially the Republic of Panama ( es, República de Panamá), is a transcontinental country spanning the southern part of North America and the northern part of South America. It is bordered by Co ...
,
Turks and Caicos Islands The Turks and Caicos Islands (abbreviated TCI; and ) are a British Overseas Territory consisting of the larger Caicos Islands and smaller Turks Islands, two groups of tropical islands in the Lucayan Archipelago of the Atlantic Ocean and ...
and
Zimbabwe Zimbabwe (), officially the Republic of Zimbabwe, is a landlocked country located in Southeast Africa, between the Zambezi and Limpopo Rivers, bordered by South Africa to the south, Botswana to the south-west, Zambia to the north, and ...
. (See
ISO 4217 ISO 4217 is a standard published by the International Organization for Standardization (ISO) that defines alpha codes and numeric codes for the representation of currencies and provides information about the relationships between individual ...
for a complete list of territories by currency.)


Monetary co-operation

Monetary co-operation is the mechanism in which two or more monetary policies or
exchange rates In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of ...
are linked, and can happen at regional or international level. The monetary co-operation does not necessarily need to be a voluntary arrangement between two countries, as it is also possible for a country to link its
currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general ...
to another countries currency without the
consent Consent occurs when one person voluntarily agrees to the proposal or desires of another. It is a term of common speech, with specific definitions as used in such fields as the law, medicine, research, and sexual relationships. Consent as und ...
of the other country. Various forms of monetary co-operations exist, which range from fixed parity systems to monetary unions. Also, numerous institutions have been established to enforce monetary co-operation and to stabilise
exchange rate In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of t ...
s, including the
European Monetary Cooperation Fund The European Monetary Cooperation Fund (EMCF) was a fund established in April 1973 by members of the European Economic Community (EEC) to ensure concerted action for a proper functioning of the Community exchange system. The EMCF was located in Lu ...
(EMCF) in 1973 and the
International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...
(IMF) Monetary co-operation is closely related to
economic integration Economic integration is the unification of economic policies between different states, through the partial or full abolition of tariff and non-tariff restrictions on trade. The trade-stimulation effects intended by means of economic integrati ...
, and are often considered to be reinforcing processes.Berben, R.-P., Berk, J. M., Nitihanprapas, E., Sangsuphan, K., Puapan, P., & Sodsriwiboon, P. (2003). Requirements for successful currency regimes: The Dutch and Thai experiences: De Nederlandsche Bank However, economic integration is an economic arrangement between different regions, marked by the reduction or elimination of
trade barriers Trade barriers are government-induced restrictions on international trade. According to the theory of comparative advantage, trade barriers are detrimental to the world economy and decrease overall economic efficiency. Most trade barriers work ...
and the coordination of monetary and
fiscal policies In economics and political science, fiscal policy is the use of government revenue collection ( taxes or tax cuts) and expenditure to influence a country's economy. The use of government revenue expenditures to influence macroeconomic variables ...
, whereas monetary co-operation is focussed on currency linkages. A monetary union is considered to be the crowning step of a process of monetary co-operation and
economic integration Economic integration is the unification of economic policies between different states, through the partial or full abolition of tariff and non-tariff restrictions on trade. The trade-stimulation effects intended by means of economic integrati ...
. In the form of monetary co-operation where two or more countries engage in a mutually beneficial exchange,
capital Capital may refer to: Common uses * Capital city, a municipality of primary status ** List of national capital cities * Capital letter, an upper-case letter Economics and social sciences * Capital (economics), the durable produced goods used fo ...
among the countries involved is free to move, in contrast to
capital controls Capital controls are residency-based measures such as transaction taxes, other limits, or outright prohibitions that a nation's government can use to regulate flows from capital markets into and out of the country's capital account. These measures ...
. Monetary co-operation is considered to promote balanced
economic growth Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate o ...
and monetary stability, but can also work counter-effectively if the member countries have (strongly) differing levels of
economic development In the economics study of the public sector, economic and social development is the process by which the economic well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals and ...
. Especially European and Asian countries have a history of monetary and exchange rate co-operation, however the European monetary co-operation and economic integration eventually resulted in a European monetary union.


Example: The Snake

In 1973, the currencies of the
European Economic Community The European Economic Community (EEC) was a regional organization created by the Treaty of Rome of 1957,Today the largely rewritten treaty continues in force as the ''Treaty on the functioning of the European Union'', as renamed by the Lis ...
countries, Belgium, France, Germany, Italy, Luxemburg and the Netherlands, participated in an arrangement called ''the Snake''. This arrangement is categorized as exchange rate co-operation. During the next 6 years, this agreement allowed the currencies of the participating countries to fluctuate within a band of plus or minus 2¼% around pre-announced central rates. Later, in 1979, the European Monetary System (EMS) was founded, with the participating countries in ''‘the Snake’'' being founding members. The EMS evolves over the next decade and even results into a truly
fixed exchange rate A fixed exchange rate, often called a pegged exchange rate, is a type of exchange rate regime in which a currency's value is fixed or pegged by a monetary authority against the value of another currency, a basket of other currencies, or another ...
at the start of the 1990s. Around this time, in 1990, the EU introduced the Economic and Monetary Union (EMU), as an umbrella term for the group of policies aimed at converging the economies of member states of the
European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are located primarily in Europe, Europe. The union has a total area of ...
over three phases Economic and Monetary Union of the European Union on Wikipedia


Example: The baht-U.S. dollar co-operation

In 1963, the Thai government established the Exchange Equalization Fund (EEF) with the purpose of playing a role in stabilizing exchange rate movements. It linked to the
U.S. dollar The United States dollar ( symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
by fixing the amount of gram of
gold Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile ...
per
baht The baht (; th, บาท, ; sign: ฿; code: THB) is the official currency of Thailand. It is divided into 100 ''satang'' (, ). The issuance of currency is the responsibility of the Bank of Thailand. SWIFT ranked the Thai baht as the 10th-m ...
as well as the baht per U.S. dollar. Over the course of the next 15 years, the Thai government decided to depreciate the baht in terms of gold three times, yet maintain the
parity Parity may refer to: * Parity (computing) ** Parity bit in computing, sets the parity of data for the purpose of error detection ** Parity flag in computing, indicates if the number of set bits is odd or even in the binary representation of the ...
of the baht against the U.S. dollar. Due to the introduction of a new generalized floating exchange rate system by the
International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...
(IMF) in 1978 that gave a smaller role to gold in the international monetary system, this fixed parity system as a monetary co-operation policy was terminated. The Thai government amended its monetary policies to be more in line with the new IMF policy.


Advantages

*A fixed exchange rate may minimize instabilities in real economic activity *Central banks can acquire credibility by fixing their country's currency to that of a more disciplined nation *On a
microeconomic Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics fo ...
level, a country with poorly developed or illiquid money markets may fix their exchange rates to provide its residents with a synthetic money market with the liquidity of the markets of the country that provides the vehicle currency *A fixed exchange rate reduces volatility and fluctuations in relative prices *It eliminates exchange rate risk by reducing the associated uncertainty *It imposes discipline on the monetary authority *International trade and investment flows between countries are facilitated *
Speculation In finance, speculation is the purchase of an asset (a commodity, goods, or real estate) with the hope that it will become more valuable shortly. (It can also refer to short sales in which the speculator hopes for a decline in value.) Many ...
in the currency markets is likely to be less destabilizing under a fixed exchange rate system than it is in a flexible one, since it does not amplify fluctuations resulting from business cycles *Fixed exchange rates impose a price discipline on nations with higher inflation rates than the rest of the world, as such a nation is likely to face persistent deficits in its
balance of payments In international economics, the balance of payments (also known as balance of international payments and abbreviated BOP or BoP) of a country is the difference between all money flowing into the country in a particular period of time (e.g., ...
and loss of reserves *Prevent, debt monetization, or fiscal spending financed by debt that the monetary authority buys up. This prevents high inflation.


Disadvantages


Lack of automatic rebalancing

One main criticism of a fixed exchange rate is that flexible exchange rates serve to adjust the
balance of trade The balance of trade, commercial balance, or net exports (sometimes symbolized as NX), is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balance ...
. When a trade deficit occurs under a floating exchange rate, there will be increased demand for the foreign (rather than domestic) currency which will push up the price of the foreign currency in terms of the domestic currency. That in turn makes the price of foreign goods less attractive to the domestic market and thus pushes down the trade deficit. Under fixed exchange rates, this automatic rebalancing does not occur.


Currency crisis

Another major disadvantage of a fixed exchange-rate regime is the possibility of the central bank running out of foreign exchange reserves when trying to maintain the peg in the face of demand for foreign reserves exceeding their supply. This is called a
currency crisis A currency crisis is a type of financial crisis, and is often associated with a real economic crisis. A currency crisis raises the probability of a banking crisis or a default crisis. During a currency crisis the value of foreign denominated deb ...
or balance of payments crisis, and when it happens the central bank must devalue the currency. When there is the prospect of this happening, private-sector agents will try to protect themselves by decreasing their holdings of the domestic currency and increasing their holdings of the foreign currency, which has the effect of increasing the likelihood that the forced devaluation will occur. A forced devaluation will change the exchange rate by more than the day-by-day exchange rate fluctuations under a flexible exchange rate system.


Freedom to conduct monetary and fiscal policy

Moreover, a government, when having a fixed rather than dynamic exchange rate, cannot use monetary or fiscal policies with a free hand. For instance, by using reflationary tools to set the economy growing faster (by decreasing taxes and injecting more money in the market), the government risks running into a trade deficit. This might occur as the purchasing power of a common household increases along with inflation, thus making imports relatively cheaper. Additionally, the stubbornness of a government in defending a fixed exchange rate when in a
trade deficit The balance of trade, commercial balance, or net exports (sometimes symbolized as NX), is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balanc ...
will force it to use deflationary measures (increased taxation and reduced availability of money), which can lead to
unemployment Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for work during the refe ...
. Finally, other countries with a fixed exchange rate can also retaliate in response to a certain country using the currency of theirs in defending their exchange rate.


Other disadvantages

*The need for a fixed exchange rate regime is challenged by the emergence of sophisticated derivatives and financial tools in recent years, which allow firms to
hedge A hedge or hedgerow is a line of closely spaced shrubs and sometimes trees, planted and trained to form a barrier or to mark the boundary of an area, such as between neighbouring properties. Hedges that are used to separate a road from adjoi ...
exchange rate fluctuations *The announced exchange rate may not coincide with the market equilibrium exchange rate, thus leading to excess demand or excess supply *The central bank needs to hold stocks of both foreign and domestic currencies at all times in order to adjust and maintain exchange rates and absorb the excess demand or supply *Fixed exchange rate does not allow for automatic correction of imbalances in the nation's balance of payments since the currency cannot appreciate/depreciate as dictated by the market *It fails to identify the degree of
comparative advantage In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. C ...
or disadvantage of the nation and may lead to inefficient allocation of resources throughout the world *There exists the possibility of policy delays and mistakes in achieving external balance *The cost of government intervention is imposed upon the foreign exchange market *It does not work well in countries with dissimilar economies and thus dissimilar economic shocks


Fixed exchange rate regime versus capital control

The belief that the fixed exchange rate regime brings with it stability is only partly true, since speculative attacks tend to target currencies with fixed exchange rate regimes, and in fact, the stability of the economic system is maintained mainly through
capital control Capital controls are residency-based measures such as transaction taxes, other limits, or outright prohibitions that a nation's government can use to regulate flows from capital markets into and out of the country's capital account. These measure ...
. A fixed exchange rate regime should be viewed as a tool in capital control.


FIX Line: Trade-off between symmetry of shocks and integration

*The trade-off between symmetry of shocks and market integration for countries contemplating a pegged currency is outlined in Feenstra and Taylor's 2015 publication "International Macroeconomics" through a model known as the FIX Line Diagram. *This symmetry-integration diagram features two regions, divided by a 45-degree line with slope of -1. This line can shift to the left or to the right depending on extra costs or benefits of floating. The line has slope= -1 is because the larger symmetry benefits are, the less pronounced integration benefits have to be and vice versa. The right region contains countries that have positive potential for pegging, while the left region contains countries that face significant risks and deterrents to pegging. *This diagram underscores the two main factors that drive a country to contemplate pegging a currency to another, shock symmetry and market integration. Shock symmetry can be characterized as two countries having similar demand shocks due to similar industry breakdowns and economies, while market integration is a factor of the volume of trading that occurs between member nations of the peg. *In extreme cases, it is possible for a country to only exhibit one of these characteristics and still have positive pegging potential. For example, a country that exhibits complete symmetry of shocks but has zero market integration could benefit from fixing a currency. The opposite is true, a country that has zero symmetry of shocks but has maximum trade integration (effectively one market between member countries). *This can be viewed on an international scale as well as a local scale. For example, neighborhoods within a city would experience enormous benefits from a common currency, while poorly integrated and/or dissimilar countries are likely to face large costs.


See also

* List of circulating fixed exchange rate currencies *
Exchange rate regime An exchange rate regime is a way a monetary authority of a country or currency union manages the currency about other currencies and the foreign exchange market. It is closely related to monetary policy and the two are generally dependent on many ...
*
Floating exchange rate In macroeconomics and economic policy, a floating exchange rate (also known as a fluctuating or flexible exchange rate) is a type of exchange rate regime in which a currency's value is allowed to fluctuate in response to foreign exchange ma ...
*
Linked exchange rate A linked exchange rate system is a type of exchange rate regime that pegs the exchange rate of one currency to another. It is the exchange rate system implemented in Hong Kong to stabilise the exchange rate between the Hong Kong dollar (HKD) and ...
*
Managed float regime Managed float regime is an international financial environment in which exchange rates fluctuate from day to day, but central banks attempt to influence their countries' exchange rates by buying and selling currencies to maintain a certain ran ...
*
Gold standard A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from th ...
*
Bretton Woods system The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Bretto ...
* Nixon Shock *
Smithsonian Agreement The Smithsonian Agreement, announced in December 1971, created a new dollar standard, whereby the currencies of a number of industrialized states were pegged to the US dollar. These currencies were allowed to fluctuate by 2.25% against the dol ...
* Foreign exchange fixing *
Currency union A currency union (also known as monetary union) is an intergovernmental agreement that involves two or more states sharing the same currency. These states may not necessarily have any further integration (such as an economic and monetary union, ...
*
Black Wednesday Black Wednesday (or the 1992 Sterling crisis) occurred on 16 September 1992 when the UK Government was forced to withdraw sterling from the European Exchange Rate Mechanism (ERM), after a failed attempt to keep its exchange rate above the ...
*
Capital control Capital controls are residency-based measures such as transaction taxes, other limits, or outright prohibitions that a nation's government can use to regulate flows from capital markets into and out of the country's capital account. These measure ...
*
Convertibility Convertibility is the quality that allows money or other financial instruments to be converted into other liquid stores of value. Convertibility is an important factor in international trade, where instruments valued in different currencies mus ...
*
Currency board In public finance, a currency board is a monetary authority which is required to maintain a fixed exchange rate with a foreign currency. This policy objective requires the conventional objectives of a central bank to be subordinated to the exch ...
*
Impossible trinity The impossible trinity (also known as the impossible trilemma or the Unholy Trinity) is a concept in international economics which states that it is impossible to have all three of the following at the same time: * a fixed foreign exchange rate ...
* Speculative attack *
Swan diagram The Swan Diagram, 233x233px In economics, a Swan Diagram, also known as the Australian model (because it was originally published by Australian economist Trevor Swan in 1956 to model the Australian economy during the Great Depression), represent ...


References

{{Reflist, 30em, refs= *{{cite book , last1=Dornbusch , first1=Rüdiger , author-link=Rüdiger Dornbusch , last2=Fisher , first2=Stanley , author2-link=Stanley Fischer , last3=Startz , first3=Richard , title=Macroeconomics , edition=Eleventh , publisher=McGraw-Hill/Irwin , location=New York , year=2011 , isbn=978-0-07-337592-2 *{{cite book, last=Kreinin, first=Mordechai, author-link=Mordechai E. Kreinin, title=International Economics: A Policy Approach, publisher=Pearson Learning Solutions, year=2010, isbn=978-0-558-58883-0, pages=438 * {{cite book, last1=Bordo, first1=Michael D., last2=Christl, first2=Josef, last3=Just, first3=Christian, last4=James, first4=Harold, title=OENB Working Paper (no. 92), year=2004, url=http://www.oenb.at/dms/oenb/Publikationen/Volkswirtschaft/Working-Papers/2004/Working-Paper-92/fullversion/wp92_tcm16-22389.pdf *{{cite book, last=Bordo, first=Michael, title=Gold Standard and Related Regimes: Collected Essays, year=1999, publisher=Cambridge University Press, isbn=978-0-521-55006-2 *{{cite book, last=Salvatore, first=Dominick, title=International Economics, publisher=John Wiley & Sons, year=2004, isbn=978-81-265-1413-7 *{{cite book, last=Cooper, first=R.N., title=International Finance, pages=25–37, publisher=Penguin Publishers, year=1969 **{{Cite book , last1 = Garber , first1 = Peter M. , last2 = Svensson , first2 = Lars E. O. , year = 1995 , chapter = The Operation and Collapse of Fixed Exchange Rate Regimes , title = Handbook of International Economics , volume = 3 , pages = 1865–1911 , publisher = Elsevier , doi = 10.1016/S1573-4404(05)80016-4 , isbn = 9780444815477 Foreign exchange market Gold standard fr:Régime de change#Régime de change fixe