Question

a. Why do many emerging market economies prefer to adopt a fixed exchange rate, while developing countries fix their currencies?
note: no plagrism

Answer 1

It has been observed in the history that many of the emerging market economies were using the floating exchange rate system in the past. But this created so much of financial crises to those countries, as it has got huge impact on the export and import transactions in the era of globalisation. In this context, many of the emerging market economies prefer to have fixed exchange rate system or crawling peg system. The reason is that it will induce the importers and exporters to do their business seamlessly without looking on the future fluctuations of exchange rate. Developing countries try to fix their currencies to ensure more stability to their currencies. It may be achieved by selling foreign exchange assets and buying home currencies.