MANAGED EXCHANGE RATES

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MANAGED EXCHANGE RATES

In between the two extremes of rigidly fixed and completely flexible is the middle ground of managed exchange rates. Here, exchange rates are basically determined by market forces but governments buy or sell currencies or Change their money supplies to affect their exchange rates. Sometimes governments lean against the winds of private markets. At other
times governments have “target zones” which guide their policy actions. This system is becoming less important as countries are increasingly gravitating toward fixed- or flexible-exchange-rate systems.

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MANAGED EXCHANGE RATES