Choosing Between Fixed, Freely Floating, Or A Dirty Float Exchange Rate System

  1. If you were elected to choose between a fixed, freely floating, or a dirty float exchange rate system, which would you choose for your home country?  Why?( KOREA)

If elected to choose between the different types of exchange rates, I would pick on the fixed exchange rate system. This type of an exchange rate allows the value of a currency to be fixed against values of other currencies across the world. At times the value can be pegged on another measure such as gold. One reason as to why fixed rate would be picked for Korea is because it will allow for the stabilization of the value of Korean currency in relation to other currencies (Joan, 11968). The value of the currency becomes more stable because it is directly fixed on another international currency that is more stable. Once the value is fixed to the other trading currency, its value cannot change even if the market conditions changes. The stability in currency values allows for a stabilized international trade between Korea and other international states (Joan, 1968). Moreover, fixed rate will be important for Korea since external trade is a major contributor to the Korean GDP. On the contrary, if the floating system were to be used, it would clearly hurt the external trade between Korea and other states. In summary Korea would stand to lose in the external trade if floating system were to be picked.

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