What is a flexible exchange rate system?

In macroeconomics, a flexible exchange-rate system is a monetary system that allows the exchange rate to be determined by supply and demand. Every currency area must decide what type of exchange rate arrangement to maintain. Between permanently fixed and completely flexible, some take heterogeneous approaches.

What is a floating exchange rate?

A system of floating exchange rates leaves monetary policymakers free to pursue other goals, such as stabilizing employment or prices. During an extreme appreciation or depreciation of currency, a central bank will normally intervene to stabilize the currency.

What is a floating or flexible exchange rate regime?

In a floating or flexible exchange rate regime, the exchange rate is allowed to find its equilibrium level on the foreign exchange market without central bank intervention. Flexible exchange rates: Supply and demand in the foreign exchange market determine the equilibrium exchange rate without central bank intervention.