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Markets - Foreign exchange marketFurther workIn this section we look at a few other areas of economic theory that you may want to consider when studying foreign exchange markets. The advantages and disadvantages of fixed exchange rates - fixed exchange rate systems can help to eliminate the uncertainty of foreign trade and avoid speculative flows, but they also require governments to hold large foreign exchange reserves. The advantages and disadvantages of floating exchange rates - floating exchange rates should help the balance of payments to adjust automatically, but they also create a good deal of uncertainty in international trade and may be inflationary. |
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