What's it? Dollarization means adopting the U.S. dollar as a currency and unit of account by countries other than the United States. The term also has a broader meaning: the adoption of foreign currency by a country other than its issuing country.
Exchange Rate System
Pure Floating Exchange Rate: Flexibility & Volatility (Pros, Cons)
What's it? A pure floating exchange rate, or free-floating exchange rate, is a system of exchange rates in which the value of a domestic currency against a foreign currency moves according to a market mechanism. The market mechanism is the
Exchange Rate Systems: Fixed vs. Floating & Popular Variations
The exchange rate system plays a critical role in the global financial landscape, dictating how currencies are valued against each other. In essence, it's the framework a country adopts to manage its currency's exchange rate. This guide will explore
Passive Crawling Peg: The Inflation-Fighting Exchange Rate System (Pros, Cons)
Looking for a way to understand exchange rates and economic stability? The passive crawling peg might be the answer. This system helps countries combat inflation and maintain a competitive edge in the global market. Let's break down how it works and
Flexible Exchange Rates: Freedom & Fluctuations (Determinants, Pros, Cons)
Flexible exchange rates, also known as floating exchange rates, are a system where a country's currency value is determined by the forces of supply and demand in the foreign exchange market rather than by a central bank. Unlike fixed exchange rates,
Fixed Parity with Crawling Bands: Gradual Exit Strategy for Stable Exchange Rates
Fixed parity with crawling bands offers a nuanced approach to exchange rates, bridging the gap between the stability of a fixed peg and the flexibility of a floating currency. Unlike a completely fixed exchange rate, which can limit a central bank's
Managed Floating Exchange Rate: Balancing Freedom with Stability (Pros, Cons)
A managed floating exchange rate, also known as a dirty float, is a system where governments allow market forces to influence the exchange rate, but they reserve the right to intervene occasionally in the foreign exchange market. This intervention
Floating Exchange Rate System: Meaning, Pros, Cons
The floating exchange rate system is an exchange rate system in which the government let the domestic currency to fluctuate in response to demand and supply in the foreign exchange market. This system is the opposite of a fixed exchange rate system.
Flexible Peg System: Balancing the Exchange Rate Stability & Adjustment
A flexible peg offers a middle ground in the world of exchange rates. Imagine a tether for your boat that allows some movement but keeps it anchored in place. That's the essence of a flexible peg system for a country's currency. In this system, the
Fixed Parity System: Pros, Cons, vs. Currency Boards
A fixed parity system introduces a world of stability in the midst of fluctuating currency values. Imagine tethering your boat's anchor to a sturdy post: that's essentially what a fixed parity system does for a country's currency. In this system, a
Crawling Peg: A Flexible Anchor for Exchange Rates (Pros, Cons)
A crawling peg offers a dynamic approach to managing a country's exchange rate. Unlike a fixed exchange rate, where the value remains constant, a crawling peg allows for gradual adjustments within a predefined band. This system empowers central banks
Active Crawling Peg: Pre-Planned Adjustments for Exchange Rate Stability (Pros, Cons)
Active crawling peg is a type of crawling peg system where the central bank preannounces a target band of the exchange rate. In a crawling peg, the central bank sets a target band for exchange rate fluctuations. Exchange rate movements must be within