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change rate and introduced the policies that linked the national currency to the dollar value and let it fluctuate only in small scope around the dollar value.
The dynamics of currencies during the 20th century can be illustrated by the exchange rate between dollar and pound in the period from 1957 to 2001(fig.1).

1.7. Modern variants of exchange rate systems

Today there exist three major currencies: dollar, euro and yen; other currencies are in some way dependent from these ones.
Currently we can witness the development of three major exchange rate systems and several their modifications. The countries that use managing exchange rate system have worked out several policies for maintaining economic stability. One of the long-living policies is the usage of currency boards. The idea of a currency board means full backing of international currency reserves. Since the countries using fixed exchange rate systems need to have reserves of international currency, one of their main problems is to cover the excess demand for foreign currency in case of instability; and the main reason that causes economical disbalance in such countries, is the inability to cover excess demand and therefore the inability to keep the fixed exchange rate on the desired level. This problem can be avoided by currency board: i.e. the bank only issues as much national money, as it can cover by the reserves of international currency. Such systems have proved their viability, but, like all fixed exchange rate systems, they are still vulnerable to the speculative attacks. However, the examples of Argentinean and Hong Kong currency boards show us that these systems can be effective, at least in the short run.
The other economical instruments that are used for exchange rate managements, are pegging the currency (either to one currency, or to the basket of currencies), accepting a managed float for a specific currency within the region where different currencies are in use, and letting the currency to float freely against all other currencies.

2. Pros and Cons of Each System

Since exchange rates and economies of all countries have experienced significant instability in 20th century, there have appeared a lot of arguments concerning the choice of exchange rate system. Since the fixed exchange rate system has been widely used before, there have been a lot of its supporters. The main their argument has been that floating exchange rates mean instability. However, there appeared a number of researchers offering arguments in favor of floating exchange rate system.

2.1. Advantages of fixed exchange rate system

First of all, fixed exchange rates offer much greater stability for the enterprisers and stimulate international trade; since the exchange rates stay on the same level, the importers and exporters can plan their policy without begin afraid of depreciation or appreciation of the currency. Moreover, fixed exchange rates make the producers more disciplined, i.e. they are forced to keep up with the quality of their production and to control the costs of the production to stay competitive compared to international enterprisers. This advantage of fixed exchange rates allows the government to decrease i本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。