Exchange Rate Regime and Economic Performance: A Country Report on Australia
Overview
This country report analyzes Australia's exchange rate regime and its relationship to economic performance. The paper examines how Australia's floating exchange rate system, determined by supply and demand forces, has influenced the value of the Australian dollar against the US dollar from 2000 to 2019, with particular attention to economic booms and recessions.
What this coursework covers
- Exchange Rate Regime Definitions: Explains fixed versus floating exchange rate systems and their purposes
- Exchange Rate Performance Analysis: Examines 20 years of monthly Australian dollar fluctuations against the US dollar using graphical data
- Economic Factors Influencing Currency: Discusses how economic booms, recessions, and government policies affect currency strength
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Country Report On Australia
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Country Report On Australia
- Exchange Rate Regime
The Annual Report on Exchange Rate Arrangements and Exchange Restrictions 2018 defines the exchange rate regime as an approach that an organization uses to set the exchange rates for its country against other nations. Exchange rates refer to the value that a nation’s currency would be purchased or sold. The 2018 annual reports indicated that in the current century, the monetary authorities rely on both floating and fixed exchange rate regimes (IMF, 2018). In a fixed exchange regime, a nation links the value of its currency to the frequently used commodity or currency (Hefeker, 2018). For example, the US dollar has for so long been used as a reference point to most currency values. The primary importance of this regime is that it ensures the stability of the currency, and gives the investors more surety on the amount of their total wealth. As such, the investors hedge their money risks through the help of fixed exchange rates. The floating exchange rate regime refers to the system where the laws of demand and supply are allowed to determine the value of a nation’s currency (Hefeker, 2018). It is different from the fixed exchange rate regime, of which the national government has total authority to determine the exchange rate of their currency.