floating exchange rate - it is a complete failure of the state authorities of the Russian Federation of the regulatory process of the national currency against the currencies of other major countries.The direction of movement of the exchange rate is formed solely on the basis of market laws of supply and demand.At the moment, only a few countries have successfully practiced this format policy towards its currency.More widespread economic regime - an adjustable rate.
specifics of the floating exchange rate and fixed
transition to a floating exchange rate means stopping the use of a single currency band within which the value of the national currency varies clearly defined framework.Upon reaching the upper limit or lower, its forces are stepping up the monetary authorities, which are directed to the stabilization of the exchange rate.Interference in most cases held in the form of intervention.On the open market operations is actively implemented the conversion type to the national monetary unit and redundant characters.
Prior to the adoption of a floating exchange rate in the Bretton Woods agreement in 1944 fixed rate system determines the liability of central banks, independently set its currency, take full responsibility to change foreign money in accordance with the quotations.
Disadvantages of fixed-rate
Floating exchange rates were legalized in 1944, after the obvious shortcomings were seen fixed exchange rate.The main drawback - it is rigid boundaries in terms of the development of the domestic economy of the state and strict limits to exit the world stage.The second distinct lack of policy - is biased quotes in relation to each other.It has a direct connection with the specifics of the individual development of each state.For example, one country may be experiencing severe economic difficulties, while the other will be characteristic for a strong and robust financial health.This imbalance would lead to the fact that the burgeoning country will face a number of problems in connection with the unfavorable situation on the territory of another state.
Disadvantages of floating rate
In turn, the system of floating exchange rates, which eliminates all the above disadvantages, is also characterized by a number of disadvantages.It should be said about the high market volatility, which many traders quickly turned into an advantage and the basis of their earnings.Sharp negative impact of currency fluctuations is applied only to the export-import operations of the international market.
floating exchange rate in Russia
first controlled currency regime was initiated in Russia since 1999.The decision was taken due to the default, which took place in 1998.After the adverse events in the community, the Russian government has been able to eliminate the negative influence of the economy on the domestic financial sector.Already in 2005 it was introduced such a thing as a currency basket, which was used tandem dollar and the euro.It has opened up broad prospects for the regulation of the country's currency.Once the peg of the ruble has been carried out to the two strongest currencies of the world, focus on the economy of the United States exclusively instantly weakened.
Until 2009, the state government actively intervened in the foreign exchange market quotations only in that situation, if the value of the monetary unit begins to actively move toward the border corridor.After the global financial crisis in 2008 to abolish the rule.The government can intervene actively in the price movements, regardless of whether they are within the corridor or outside its borders.
first of Russia's transition to a floating exchange rate even spoke at the time Deputy Chairman Ulyukayev CBR in 2005.He proposed switching to this type of policy in the period from 2010 to 2015.At that time, the rationality of the policy change was due to the need to weaken the ruble due to a sharp increase in export earnings.The decision to ponder in a totally uncharacteristic for the present economic conditions.This financial security, and the high oil price and exchange rate stability and a favorable balance of payments.
Why does a floating exchange rate has not justified itself?
floating exchange rate - this is a serious program of economic transformation, which were prepared by actively since 2012.Its implementation is pre-assigned at the beginning of 2015.Due to change in comparison with 2005 the situation: the sanctions pressure drop in the value of "black gold", the recession in the economy, the effect of the government's actions proved the opposite.The ruble weakened against the dollar and showed unprecedented volatility.At a time when the situation could only fix the active policy of the Central Bank of Russia, on the contrary, it adopted a decision on his disengagement and actively maintains its position.What is a floating rate of the ruble in Russia, say problematic, as the effect of its implementation has not been reached.
floating exchange rate and economic instability
floating exchange rate - is the financial policy of the state, which is unacceptable to use in an unstable economy.This is due to the fact that the pattern of behavior of the government only increases the risk of instability of the currency.An interesting fact is that the advice of the best "world experts" who advise the government of the state, today is very divided.In particular, according to a floating exchange rate regime Investbank is absolutely unacceptable due to the severe sanctions put forward by the State for a sufficiently large corporate foreign debt of the state.Financial expert makes sure the forecast concerning the instability of the state, both financial and price.Andrei Belousov, who served as assistant to the president publicly stated that, despite the introduction of a floating exchange rate, the country is ready for this still is not enough.Concerns related to the fact that the volatility of the currency can lead to a complete destabilization of the external trade transactions as a result of the failure to fulfill obligations under previously signed contracts.
analogy held since 1993, when in the middle of the spring due to the fall of the ruble most large companies in the country were forced to terminate long-term contracts and suffered very significant losses.As world practice shows, a floating exchange rate - it is monetary policy that can effectively show itself only in the countries where the economy is developing at a fast pace, and the industry is in the prime of life.Main exports thus should belong to the production.
floating rates in the world
floating exchange rate regime established in 34% of all countries of the world.The figure included 65 countries, of which 29 are practicing floating rate with interventions in rare cases, and 36 states practice the formation of the national currency pushing exclusively on the formation of market demand with supply.Absolute floating exchange rate - a phenomenon that has been fully implemented in 17 countries of the European Union.The remaining 13 countries are different 70% share in the export industry.The list of countries practicing freestyle swimming national currency and specializing in the production of oil, fell only Mexico and Norway.The course is actively practiced and Russia are strategic partners.This is Turkey, Brazil and India.These states have very mild foreign exchange interventions of the Central Bank.The floating exchange rate, the effects of which have already begun to actively manifest itself, it is not effective, because Russia is not characteristic of a developed insurance market, foreign exchange risks.Oil-exporting countries with the same specialization have other currencies, mainly the stable and fixed.
considering the question of what it means to a floating exchange rate for the Russian, is to say that the situation is not tenable.Central Bank is not fulfilling its obligations as defined in the legislation as a result of daily quotations are a considerable distance.Plus for the financial structure is that it does not have to spend their gold reserves to the game with speculators.Past emphasis overlooked the fact that speculators thrive even in the face of strong volatility.Place the most influential player of the market in the face of the Central Bank today took major experts from foreign currency proceeds, which own 72% of cash flow.What threatens the floating exchange rate for the country and its people in the future, say very problematic, because increasingly depends on the action or inaction of the Central Bank.
That means a floating exchange rate, and how useful it is for Russia, told in higher education, despite the fact that all of the information provided is incorrect.In one of the books on the economy provided the following data: "The floating exchange rate in a lack of balance of payments will be compared with a deficit that undeniably will reduce the inflow of dollars into the territory of the state.The cost of the national currency will fall systematically, as a result - reduce the cost of domestic goods, their popularization on the domestic market and increasing exports.Further export growth will increase the influx of dollars and demand for foreign currency will fall, the ruble will rise. "To some extent this is correct, but, considering this question, we must consider that typically true for countries that supply goods, the cost of which is formed solely of the costs of the internal market.Explain what threatens the floating exchange rate, it will be easier when you consider that the export of the state on 72% consists of oil and gas, and the cost of energy generated exclusively in the international market.As a result, "free floating ruble" can not lead to any increase in the national currency, or to an increase in export volumes.To direct the benefits of the monetary policy in its side, Russia should diversify exports on the commodity nomenclature, not by partner countries that are actively being done under the guise of diversification.
What to expect in the future?
floating exchange rate, the effects of which are still unknown, offers opportunities to the Central Bank in terms of committing interventions.At the same time the IMF standards clearly state that the Central Bank has the right to intervene no more than 3 times within 6 months, while their duration should not be more than 3 days.Strict regulation of the stability of the national currency will be able to hold a minimum amount.
Bank of Russia actively uses the interest rate to regulate the money supply.Strengthening currencies made the reduction of its quantity, which leads to the formation of high liquidity risk and hinders the economic growth of the state.Loans are growing, becoming inaccessible source of investment for the economic sectors.Considering the question of what it means to a floating exchange rate, we can safely say that the phenomenon, in fact as well as a decrease of course - is the policies of the Central Bank.Consequences - it jumps the currency market and aggressive speculative mood.