ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A managed floating exchange rate is an exchange rate system that allows a nation’s central bank to intervene regularly in foreign exchange markets to change the direction of the currency’s float and/or reduce the amount of currency volatility. This exchange rate system is also known as a “dirty float”.

Detailed explanation-2: -A dirty float is a floating exchange rate where a country’s central bank occasionally intervenes to change the direction or the pace of change of a country’s currency value. A dirty float is also known as a “managed float."

Detailed explanation-3: -In macroeconomics and economic policy, a floating exchange rate (also known as a fluctuating or flexible exchange rate) is a type of exchange rate regime in which a currency’s value is allowed to fluctuate in response to foreign exchange market events.

Detailed explanation-4: -A managed floating exchange rate (also known as dirty float’) is an exchange rate regime in which the exchange rate is neither entirely free (or floating) nor fixed. Rather, the value of the currency is kept in a range against another currency (or against a basket of currencies) by central bank intervention.

Detailed explanation-5: -In a free-floating exchange rate system, exchange rates are determined by demand and supply. Exchange rates are determined by demand and supply in a managed float system, but governments intervene as buyers or sellers of currencies in an effort to influence exchange rates.