What are the merits of fixed exchange rate system?

1.	What are the merits of fixed exchange rate system?
Answer» 1. Stability: It ensures stability, in the international money market/ exchange market. Day to day fluctuations are avoided. It helps formulation of long term economic policies, particularly relating to exports and imports. 2. Encourages international trade: Fixed exchange rate system implies low risk and low uncertainty of future payments. It encourages international trade. 3. Co-ordination of macro policies:Fixed exchange rate helps co¬ordination of macro policies across different countries of the world. Long term economic policies can be drawn in the area of international trade and bilateral trade agreements.

Answer»

1. Stability: It ensures stability, in the international money market/ exchange market. Day to day fluctuations are avoided. It helps formulation of long term economic policies, particularly relating to exports and imports.

2. Encourages international trade: Fixed exchange rate system implies low risk and low uncertainty of future payments. It encourages international trade.

3. Co-ordination of macro policies:Fixed exchange rate helps co¬ordination of macro policies across different countries of the world. Long term economic policies can be drawn in the area of international trade and bilateral trade agreements.

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