ExchangeR
1Inflation
2Changes in demands for export import
3Invisible trade
4Interest rates
5Capital movements
6Speculation
7Government activities
8Confidence to future
Floating ER from 70s
Advs
1Automatic stabilisation
2Freeing internal(unempl)policy constr
3Absence of crisis(occur when fixed rate)
4Management can still exist
5Flexibility(after oil price changes)
6Avoiding "import" of inflation
7Lower reserves needed
Disadvs
1Uncertainty
2Lack of investment
3Speculation
4Lack of discipline

 Fixed ER
Gold
Pegged 
Exchange control(no change currencies)
adjustable peg

 Equil
1PPP
Abasket has nothing to do with IT
Binfluenced by govn.interest rates
CConfidence 
2The portfolio balance theory - large investors  Ignores future expetations
3The interest rate parity theory - forwards
Recent
1Monetary funds - next chapter - attempt to stabilise(organisat.in essay)
2Dirty floating - buying excess EEA
3Trade weighted indices
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