Free and Managed Currencies

Managed currencies are subject to intervention by their governments; such intervention is normally undertaken when the government perceives the national interest to be at stake. Governments have an interest in the value of their currencies because strong currencies make their exports more expensive and less competitive, while relatively weaker currencies improve the outlook for exports. Since global trade is now the norm, maintaining a strong export trade is particularly important to most governments (Erlanger, 1995, p. C7).

Some managed currencies are managed within a "band;" the currencies float within a predetermined price range (the band), but the government will intervene to prevent the currency from either rising or falling outside the band's parameters. These are sometimes referred to as "dirty floats" (Epstein, 1999, p.ß7). This highly specialized form of managed currency has found particular favor among developing nations as a way to balance the advantages of fixed currencies with the advantages of floating currencies ("T

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rly broadcast on television and radio, and given prominent display in newspapers, it is likely that few individuals appreciate the effect that such information can have on their daily lives. But if a currency floats and fluctuates wildly, investment in the home country of that currency is likely to be less intense than in nations whose currencies are more stable. This can have a direct effect on jobs and the welfare of citizens of nations well removed from the country in question. The issue is particularly important to those who work in companies which participate, either directly or indirectly, in international trade. Some companies may take great pains to protect their international investment through sophisticated hedging techniques which seek to minimize the effect of currency fluctuation. Other companies may lobby governments to intervene or remove themselves from managing currencies. Still other companies will seek to have fixed currencies start fluctuating so that the foreign exchange more directly reflects the international perception of the currency in question. The end result is that decision makers in even small companies can no longer afford to distance themselves from the issue of exchange rates and the effect
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Some common words found in the essay are:
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Approximate Word count = 2043
Approximate Pages = 8 (250 words per page)

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