11.2.1—Exchange rate measures

Exchange-rate regimes describe how the currency value is determined: floating rates respond mainly to demand and supply; fixed rates are maintained near an official parity; managed regimes allow market movement with intervention.

The choice affects monetary autonomy, reserves, credibility and adjustment to shocks. A regime is not defined by one intervention: state the target, permitted band and response rule.

A central bank defending a fixed parity may buy its currency with foreign reserves when downward pressure appears; a floating central bank may instead change interest rates or tolerate the movement.

“Managed float” does not mean a permanently fixed price, and a stated peg is not credible if reserves or policy commitment cannot support it.