currency regimes (currency info)

fixed (pegged) exchange rate

government fixes currency to another (often USD). exchanging the currency (graph) ex: 1 peso=2USD pros: stability low inflation investor confidence. cons: loss of monetary policy crisis risk reserve drain

floating exchange rate

market sets value for currency via supply and demand. if demand on currency increases --> currency appreciates (vise versa). pros: policy independence shock absorption. cons: volatility exporter uncertainty

managed float

MOSTLY market driven but occasionally has government intervention

dollorization

country completely abandons their currency and adopts a new one. pros: inflation control and credibility. cons: no monetary policy and loss of soverignty