Financial Markets and Institutions
Financial Markets and Institutions
6th Edition
ISBN: 9780077641825
Author: SAUNDERS
Publisher: Mcgraw-Hill Course Content Delivery
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Chapter 9, Problem 1DYU
Summary Introduction

To discuss: The way agreement BW had an effect on the capability of the foreign exchange rate in order for free fluctuation.

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Explanation of Solution

During the period of 1944 to 1971 the agreement BW has given notice for the exchange of a currency for another currency that has to be fixed with the narrow bands for a specific rates with the help of the government intervention. The agreement lead to a situation where certain currencies are valued more and the other currencies are undervalued. This situation was addressed by the S agreement in 1971. Under this agreement majority of the countries has allowed the dollar to be devalued and the boundaries between where the rate of exchange fluctuates from 1% to 2.25%.

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