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A hard peg exchange rate policy will not allow short-term fluctuations in the exchange rate. If the government first announces a hard peg and then later changes its mind—perhaps the government becomes unwilling to keep interest rates high or to hold high levels of foreign exchange reserves—then the result of abandoning a hard peg could be a dramatic shift in the exchange rate.

In the mid-2000s, about one-third of the countries in the world used a soft peg approach and about one-quarter used a hard peg approach. The general trend in the 1990s was to shift away from a soft peg approach in favor of either floating rates or a hard peg. The concern is that a successful soft peg policy may, for a time, lead to very little variation in exchange rates, so that firms and banks in the economy begin to act as if a hard peg exists. When the exchange rate does move, the effects are especially painful because firms and banks have not planned and hedged against a possible change. Thus, the argument went, it is better either to be clear that the exchange rate is always flexible, or that it is fixed, but choosing an in-between soft peg option may end up being worst of all.

A merged currency

A final approach to exchange rate policy is for a nation to choose a common currency shared with one or more nations is also called a merged currency    . A merged currency approach eliminates foreign exchange risk altogether. Just as no one worries about exchange rate movements when buying and selling between New York and California, Europeans know that the value of the euro will be the same in Germany and France and other European nations that have adopted the euro.

However, a merged currency also poses problems. Like a hard peg, a merged currency means that a nation has given up altogether on domestic monetary policy, and instead has put its interest rate policies in other hands. When Ecuador uses the U.S. dollar as its currency, it has no voice in whether the Federal Reserve raises or lowers interest rates. The European Central Bank that determines monetary policy for the euro has representatives from all the euro nations. However, from the standpoint of, say, Portugal, there will be times when the decisions of the European Central Bank about monetary policy do not match the decisions that would have been made by a Portuguese central bank.

The lines between these four different exchange rate policies can blend into each other. For example, a soft peg exchange rate policy in which the government almost never acts to intervene in the exchange rate market will look a great deal like a floating exchange rate. Conversely, a soft peg policy in which the government intervenes often to keep the exchange rate near a specific level will look a lot like a hard peg. A decision to merge currencies with another country is, in effect, a decision to have a permanently fixed exchange rate with those countries, which is like a very hard exchange rate peg. The range of exchange rates policy choices, with their advantages and disadvantages, are summarized in [link] .

Questions & Answers

Is there any normative that regulates the use of silver nanoparticles?
Damian Reply
what king of growth are you checking .?
Renato
What fields keep nano created devices from performing or assimulating ? Magnetic fields ? Are do they assimilate ?
Stoney Reply
why we need to study biomolecules, molecular biology in nanotechnology?
Adin Reply
?
Kyle
yes I'm doing my masters in nanotechnology, we are being studying all these domains as well..
Adin
why?
Adin
what school?
Kyle
biomolecules are e building blocks of every organics and inorganic materials.
Joe
anyone know any internet site where one can find nanotechnology papers?
Damian Reply
research.net
kanaga
sciencedirect big data base
Ernesto
Introduction about quantum dots in nanotechnology
Praveena Reply
what does nano mean?
Anassong Reply
nano basically means 10^(-9). nanometer is a unit to measure length.
Bharti
do you think it's worthwhile in the long term to study the effects and possibilities of nanotechnology on viral treatment?
Damian Reply
absolutely yes
Daniel
how to know photocatalytic properties of tio2 nanoparticles...what to do now
Akash Reply
it is a goid question and i want to know the answer as well
Maciej
characteristics of micro business
Abigail
for teaching engĺish at school how nano technology help us
Anassong
Do somebody tell me a best nano engineering book for beginners?
s. Reply
there is no specific books for beginners but there is book called principle of nanotechnology
NANO
what is fullerene does it is used to make bukky balls
Devang Reply
are you nano engineer ?
s.
fullerene is a bucky ball aka Carbon 60 molecule. It was name by the architect Fuller. He design the geodesic dome. it resembles a soccer ball.
Tarell
what is the actual application of fullerenes nowadays?
Damian
That is a great question Damian. best way to answer that question is to Google it. there are hundreds of applications for buck minister fullerenes, from medical to aerospace. you can also find plenty of research papers that will give you great detail on the potential applications of fullerenes.
Tarell
what is the Synthesis, properties,and applications of carbon nano chemistry
Abhijith Reply
Mostly, they use nano carbon for electronics and for materials to be strengthened.
Virgil
is Bucky paper clear?
CYNTHIA
carbon nanotubes has various application in fuel cells membrane, current research on cancer drug,and in electronics MEMS and NEMS etc
NANO
so some one know about replacing silicon atom with phosphorous in semiconductors device?
s. Reply
Yeah, it is a pain to say the least. You basically have to heat the substarte up to around 1000 degrees celcius then pass phosphene gas over top of it, which is explosive and toxic by the way, under very low pressure.
Harper
Do you know which machine is used to that process?
s.
how to fabricate graphene ink ?
SUYASH Reply
for screen printed electrodes ?
SUYASH
What is lattice structure?
s. Reply
of graphene you mean?
Ebrahim
or in general
Ebrahim
in general
s.
Graphene has a hexagonal structure
tahir
On having this app for quite a bit time, Haven't realised there's a chat room in it.
Cied
what is biological synthesis of nanoparticles
Sanket Reply
how did you get the value of 2000N.What calculations are needed to arrive at it
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Source:  OpenStax, University of houston downtown: macroeconomics. OpenStax CNX. May 28, 2014 Download for free at http://legacy.cnx.org/content/col11653/1.3
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