What is banking, finance and exchange rate mechanism?
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(ERM)?
An exchange rate mechanism (ERM) is a device used to manage a country's currency exchange rate relative to other currencies. It is part of an economy's monetary policy and is put to use by central banks.
Such a mechanism can be employed if a country utilizes either a fixed exchange rate or one with floating exchange rate that is bounded around its peg (known as an adjustable peg or crawling peg).
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'Currency intervention' is the exchange rate mechanism in which the central bank intervenes to moderate the exchange rate movements due to demand and supply of foreign exchange.
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