Fixed vs Floating Exchange Rate Regimes

What this note covers

1. What Is an Exchange Rate and Why Does the Regime Choice Matter?
2. How a Fixed Exchange Rate System Operates
3. How Australia's Floating Exchange Rate Operates
4. Advantages and Disadvantages of Fixed Exchange Rates
5. Advantages and Disadvantages of Australia's Floating Exchange Rate
6. The Exchange Rate as an Automatic Stabiliser for the Current Account
7. Policy Evaluation: Should Australia Ever Return to a Fixed Exchange Rate?

7 sections · 14 key terms & formulas · 6 common mistakes