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Define what 'dirty float' and its varieties are and if they are likely to achieve theirs objectives.
Member rating: No Rating | Words: | Submitted: Mon Dec 22 2003
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Dirty Float AIM Define what 'dirty float' and its varieties are and if they are likely to achieve theirs objectives. Background Shortly after the Bretton Woods system collapsed in 1973, countries were free to use expansionary monetary and fiscal policies to raise output and took advantage of the benefits of flexible rates. But in the 1980s, many countries including U.S. started to suffer from very large exchange rate swings and the dissatisfaction with flexible exchange rate regimes was generated. During this time, the major developed countries tried to manage the exchange rate to some degree by having central banks intervene in the foreign exchange markets. This was not a move to an actual fixed exchange rate regime, but is often referred to as a "managed float." Main Argument Managed float (Dirty Float) Market forces set rates unless excess volatility occurs, then, central bank determines rate by buying or selling currency. Managed float is not really a single...
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