Americans tend to use the Fahrenheit scale to measure temperatures and we Filipinos tend to use the Celsius scale. If we see that the temperature in L.A. is 68F a conversion to Celsius gives 20C. There is no need when making this conversion to check in the daily papers for the latest conversion rate, we don't have to log on to a net site or contact a weatherman to get the minute market data on Fahrenheit : Celsius exchange rates. .
This sounds quite ridiculous and it really is but why is it different when it comes to converting American dollars to Philippine Peso? .
Currency control is becoming an "option" in stabilizing the exchange rate, and the immediate reaction of the business community was nervousness. The big question remains: Will currency control work for the Philippines? .
There are those, including myself, who think it won't, due to several factors. At present, our foreign reserves are declining. This could be because the exchange rate no longer reflects the market rate. I believe that controls would only give rise to the black market and a lot of graft and corruption. This is because most sellers would probably be required to sell to the banking system at existing rates while those who really need dollars had to get an allocation which should supposedly be regulated through certain criteria but in reality was focused more on palakasan and corruption. If a fixed exchange rate would be implemented, it would be harder for us to recover from the economic crisis it could bring to the country especially since we are not very much used to and knowledgeable of it. .
Though currency control is an option, like many other options, the best system is still what we have now. Which is, a floating-rate system where the central bank intervenes only when there's too much fluctuation. .
Therefore, the phrase 'fixed exchange rate' should really only be used for conversion rates like Fahrenheit to Celsius, wherein the nature of the relationship is fixed and so the rate can also be fixed.
Types of exchange rate system Fixed Rates: This is using to promote trade and attract foreign investments in smaller economics of developing countries. ... Fixed currency rates also allow a country to assure foreign investors of the stable value of their investments in the country. However, under fixed rates, a country's monetary policies can become ineffective, especially when t...
Payments are now made in US$ at a fixed exchange rate of US$1 = HK$7.80. ... Fixed Rate Adjustment The fixed rate of 7.80 cannot be adjusted periodically or this will lead to more serious problems of re-linking and to the confidence of the public. ... Exchange rate Vs Interest Rate Under the system, economic theory suggests that it is impossible to control both the exchange rate and interest rate simultaneously. ... Alternatives 1) Floating Rate Regime HK tried this regime between 1974-83 but didnt work. Under the floating rate regime, we had as high, if not higher volatility on almos...
