Exchange Rates: Markets Regulation and International Financial System

The balance of supply and demand for foreign exchange determines the foreign exchange rate of a currency.

When a country's foreign exchange rate has declined relative to that of another country, we say that the domestic currency has depreciated while the foreign currency has appreciated.

When a country's official exchange rate is lowered we say that the currency has undergone a devaluation.

Three major exchange rate systems are the gold standard, pure floating exchanged rates and managed floating exchange rates.


References

Paul Samuelson and William D. Nordhaus, Economics, 13th Edition, McGraw-Hill, 1989

UC Berkeley Lecture
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