Answered: Why Pakistan stopped using pegged…

Why Pakistan stopped using pegged exchange rate system and started using free float system? What advantages and disadvantages are expected if Pakistan adopt pegged system again?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter6: An Introduction To The Foreign Exchange Market And The Balance Of Payments

Section: Chapter Questions

Problem 11E

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Question

Why Pakistan stopped using pegged exchange rate system and started using free float system? What advantages and disadvantages are expected if Pakistan adopt pegged system again?

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Step 1: Define exchange rate:

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Step 2: Explain the reason behind using floating exchange instead of pegged exchange:

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Step 3: Explain advantage and disadvantage of going back to pegged system:

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