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Exchange Rates

Exchange Rates

Multiple Exchange Rates (also known as Differential Exchange Rates) and the GATT Policy Negotiations

In relation to the GATT Policy Negotiations, Christopher Mark (1993) provided the following explanation and/or definition of Multiple Exchange Rates (also known as Differential Exchange Rates): A system of officially prescribed rates of exchange for a country’s currency that varies depending on the type of transaction involved. For example, a government may assign its currency a given value for capital transfers, but provide for a less favorable rate of exchange for imports of luxury items, thereby increasing the price of the latter and discouraging their importation. As with other forms of exchange controls, multiple exchange rates can function as a disguised trade barrier, and their use is discouraged by the IMP.

Differential Exchange Rates and International Trade

Exchange Rates and Their Impact on Foreign Trade

Find out, in this world legal encyclopedia, additional information relating to Exchange Rates and Their Impact on Foreign Trade.

Resources

See Also

multiple exchange rates
political economy, exchange rates, exchange rate policy, exchange rate regime, international monetary regime

Further Reading

Broz, J.L. (2002) Political System Transparency and Monetary Commitment Regimes. International Organization 56 (4), 861–87.

Broz, J.L., and Frieden, J. (2001) The Political Economy of International Monetary Relations. Annual Review of Political Science 4, 317–43.

Cohen, B.J. (1977) Organizing the World’s Money: The Political Economy of International Monetary Relations. New York: Basic Books.

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Comments

6 responses to “Exchange Rates”

  1. international

    Political economy issues address the choices concerning the value or level of the exchange rate. Governments may allow the value of their currency to rise in relation to other currencies through the revaluation of a fixed rate or the appreciation of a floating rate. They may also allow the value of the currency to fall through a devaluation of a fixed rate or the depreciation of a floating rate. Obviously this question is related to the question of exchange rate regimes, in that the more fixed an exchange rate is the less it changes its value. The main question here, however, is how and why policy affects the relative prices of foreign and domestic goods.

    Reply
  2. international

    Political economy issues address the choices concerning the value or level of the exchange rate. Governments may allow the value of their currency to rise in relation to other currencies through the revaluation of a fixed rate or the appreciation of a floating rate. They may also allow the value of the currency to fall through a devaluation of a fixed rate or the depreciation of a floating rate. Obviously this question is related to the question of exchange rate regimes, in that the more fixed an exchange rate is the less it changes its value. The main question here, however, is how and why policy affects the relative prices of foreign and domestic goods.

    Reply
  3. international

    Political economy issues also address the exchange rate regime. The exchange rate regime is the rule a government uses to determine the value of an exchange rate. Basically, an exchange rate regime can be “fixed,” in which a government determines the value of the country’s exchange rate, or it can “float,” in which currency markets determine the exchange rate. Governments can adopt several variations on fixing or floating. Fixing divides into “rigid fixes” or “hard pegs,” in which a government will guarantee a specific exchange rate for the indefinite future, and “soft pegs,” in which the government reserves the ability to change the exchange rate at its discretion. Rigid fixes include “currency boards” and “monetary unions.”

    Reply
  4. international

    Political economy issues also address the exchange rate regime. The exchange rate regime is the rule a government uses to determine the value of an exchange rate. Basically, an exchange rate regime can be “fixed,” in which a government determines the value of the country’s exchange rate, or it can “float,” in which currency markets determine the exchange rate. Governments can adopt several variations on fixing or floating. Fixing divides into “rigid fixes” or “hard pegs,” in which a government will guarantee a specific exchange rate for the indefinite future, and “soft pegs,” in which the government reserves the ability to change the exchange rate at its discretion. Rigid fixes include “currency boards” and “monetary unions.”

    Reply
  5. international

    It is also important the exchange rate regime. The exchange rate regime is the rule a government uses to determine the value of an exchange rate. Basically, an exchange rate regime can be “fixed,” in which a government determines the value of the country’s exchange rate, or it can “float,” in which currency markets determine the exchange rate. Governments can adopt several variations on fixing or floating (see Frankel 1999). Fixing divides into “rigid fixes” or “hard pegs,” in which a government will guarantee a specific exchange rate for the indefinite future, and “soft pegs,” in which the government reserves the ability to change the exchange rate at its discretion. Rigid fixes include “currency boards” and “monetary unions.”

    Reply
  6. international

    It is also important the exchange rate regime. The exchange rate regime is the rule a government uses to determine the value of an exchange rate. Basically, an exchange rate regime can be “fixed,” in which a government determines the value of the country’s exchange rate, or it can “float,” in which currency markets determine the exchange rate. Governments can adopt several variations on fixing or floating (see Frankel 1999). Fixing divides into “rigid fixes” or “hard pegs,” in which a government will guarantee a specific exchange rate for the indefinite future, and “soft pegs,” in which the government reserves the ability to change the exchange rate at its discretion. Rigid fixes include “currency boards” and “monetary unions.”

    Reply

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