Write short notes on:
Meaning of Crawling Peg, Managed Floating and Adjustable Peg.

Meaning of Crawling Peg, Managed Floating and Adjustable Peg

(i)    Crawling Peg. This is a compromise between fixed exchange rate and flexible exchange rate. According to Crawling Peg system, a country specifies a parity value for its currency and allows small adjustment i.e. permits a small variation around that parity (such as ± 1% from the parity). There is a ceiling and floor limit so that it can provide some discipline on the part of monetary authorities.

(ii)    Managed Floating (D 2010C). It is a system in which central bank allows the exchange rate to be determined by market forces but intervenes at times to influence the rate. This is a hybrid of fixed and flexible exchange rates. It is characterised by some intervention in the exchange rate movements. Under clean floating (i.e., flexible exchange rate), exchange rate is market-determined without any Central Bank intervention but in managed floating, Central Bank intervenes to restrict fluctuations in exchange rate with certain limits. Managed floating rate is like flexible rate but floating, i.e., fluctuation in exchange rate is allowed with certain limits by the government. There is no fixed parity value. The authorities intervene when a particular situation requires it.

(iii)    Adjustable Peg. Under this system, a country's exchange rate is allowed to fluctuate upward or downward from the par value of its currency within a margin of 1%.