Linked Exchange Rate System
Linked Exchange Rate System (LinkedExchangeRateSystem) Overview of the Linked Exchange Rate System The Linked Exchange Rate System (referred to as: Forexrebateking Forex rebate king cashbackinforex) is a fixed exchange rate cashback forex, that is, the exchange rate between the local currency forexrebateindonesia a particular foreign currency is fixed, and in strict accordance with the established exchange ratio, so that currency issuance with the amount of foreign exchange reserves linked to the monetary system if the linked currency is the U.S. dollar, but also The linked exchange rate system is a currency board system under which the flow and stock of the monetary base must be fully backed by foreign exchange reserves, in other words, any change in the monetary base must be consistent with the corresponding change in foreign exchange reserves In the late nineteenth century, the British proposed and established the linked exchange rate system for the colonies Hong Kong, a British colony, adopted this exchange rate system, which was linked to the British pound, abolished in 1972, and reintroduced in 1983, linked to the US dollar, HK$7.8 to US$1. Typical examples are the linked exchange rate system of the Argentine peso to the US dollar and the Bulgarian lev to the West German mark (now the euro) Characteristics of the Linked Exchange Rate System Stronger commitment to local currency exchange rate stability and less possibility of reversal Advantages and disadvantages of the Linked Exchange Rate System Advantages: Stabilizes the value of the currency and reduces transaction costs in the market Disadvantages: 1. The Linked Exchange Rate System is considered to be very fragile when a financial crisis hits, for example: Argentina abandoned the Linked Exchange Rate System during the ongoing turmoil of the economic crisis, sharply lowered the official exchange rate, and introduced a dual Exchange rate system 2, the central bank using the linked exchange rate system, can not play the role of the lender of last resort, can not provide liquidity by easing monetary policy, and can not directly finance to support commercial banks in trouble, in effect ceding the monetary policy decisions to the management of the linked currency 3, the case of the linked dollar, the dollarization of the economy, the central bank loss of local currency issuance, local currency demand growth and local currency stock Interest these three minting taxes into the history of Hong Kongs linked exchange rate system Hong Kongs linked exchange rate system has a long history as a system of pegging the Hong Kong dollar to other currencies Hong Kong dollar was once pegged to the British pound between December 1935 and June 1972, between December 1935 and November 1967, one pound could be pegged to HK$16, and between November 1967 and June 1972, one pound could be pegged to From July 1972 to November 1974, it was pegged to the U.S. dollar, after which it floated freely. In the early 1980s, Hong Kong faced the issue of reunification negotiations, coupled with the stock market crash in Hong Kong, public confidence in the Hong Kong dollar was shaken, and the Hong Kong dollar continued to depreciate in value. In order to save the financial system of Hong Kong, the Hong Kong government announced the linked exchange rate system on October 15, 1983, the Hong Kong dollar was pegged to the U.S. dollar again, and the exchange rate was set at HK$7.8 to US$1. The linked exchange rate system has been in place since then, and the linked exchange rate system has been in place ever since. The Hong Kong Monetary Authority decided to put in funds to stabilize the exchange rate, which allowed the exchange rate of HK$7.8 to US$1 to be maintained. Chinas quasi-linked exchange rate system Former Chinese Premier Zhu Rongji borrowed from the international linked exchange rate system and proposed a way to determine the exchange rate of the RMB using a directly traded index as an anchor, which had a significant effect on the stable development of the economy.
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