Flexible exchange rate

Flexible exchange rates means that currency exchange rates are determined on a foreign exchange market. Flexible exchange rates means daily changes in a country's exchange rate compared to other countries.

Advantages of a variable exchange rate is that a country can pursue its own fiscal policy and monetary policy. A flexible exchange rate means that exports not will be hurt by a high interest rate or a high inflation in the country.

Variable exchange rates adjusts so that converted prices will be equal in any country and sot that the return will be equal on investments in different countries. Floating exchange rates makes it more difficult to trade with various countries because currency movements give rise to currency risks.