Open AccessEXCHANGE RATE - REGIMES AND POLICIES
Author(s) -
Novak Lučić
Publication year - 2014
Publication title -
zbornik radova ekonomskog fakulteta u istočnom sarajevu
Language(s) - English
Resource type - Journals
eISSN - 1986-6690
pISSN - 1840-3557
DOI - 10.7251/zrefis1409097l
Subject(s) - exchange rate , balance of payments , currency , abandonment (legal) , economics , foreign exchange market , monetary economics , foreign exchange risk , international economics , interest rate parity , balance (ability) , grey market , market economy , political science , law , medicine , physical medicine and rehabilitation
Exchange rate of one currency is theprice of the currency expressed in units of othercurrency. It is formed by the interaction of supply anddemand in the foreign exchange market. Given thatthe exchange rate has a direct impact on thecompetitiveness of a country in terms of features of itsexports and imports, in its balance of payments, andindirectly the overall economic and socialdevelopment, in addition to acting in marketprinciples - supply and demand in the formation ofthe equilibrium exchange rate, exchange rate issubject to different, stronger or weaker, more or less,forms of intervention. In the search for the optimalexchange rate policy of the national currency, themonetary authorities are positioned between the twoextremes - the complete abandonment of theexchange rate to the market laws of supply anddemand, or fixing the exchange rate for any of theselected anchor currency.