This document discusses different types of exchange rate regimes. It provides examples of historical exchange rates between Caribbean currencies and the US dollar. It then defines an exchange rate regime as the system that determines the value of a domestic currency in terms of foreign currencies. The three main types of regimes are floating, where supply and demand determine the rate; fixed or pegged, where a currency is tied to another; and managed float, where a currency floats within a predetermined range. It provides details on how each regime works.

1. Types of
Exchange Rate
Regimes/Systems
Prepared by Sandrea Butcher

2. Examples of exchange rates in the past
• Barbados $2.00 = US $1 or Barbados $1.00 = US $0.50
• Trinidad and Tobago $6.00 = US $1 or Trinidad and Tobago $1.00 = US
$0.167
• Guyana $200 = US $1 or Guyana $1.00 = US $0.005
• Jamaican $100 = US $1 or Jamaican $1.00 = US $0.01
• Eastern Caribbean $2.70 = US $1 or Eastern Caribbean $1.00 = US
$0.37
• Cayman $1.25 = US $1 or Cayman $1.00 = US $0.80
• Haiti $40.35 = US $1 or Haiti $1.00 = US $0.0248
• Bermuda $1 = US $1 or Bermuda $1 = US $1

3. What is an exchange rate Regime?
• This is a system that determines
the value of a domestic currency
in terms of foreign currencies.
• There are THREE types of
regimes.
Shall we
dance?

4. Floating
• Under this system, the exchange rate between domestic currency and
the foreign currency is determined by the demand and supply in the
foreign exchange market.
• The Jamaican dollar floats.

5. • Demand for foreign currency
• This arises whenever there is a
need to:
• import goods from foreign firms
• make investments abroad
• repayment of foreign debt.
• Supply of foreign currency
• This arises whenever :
• Foreigners purchase a country’s
products
• foreigners make investments in the
country
• Borrowing from foreigners

6. Fixed (or pegged)
• A fixed exchange rate, sometimes called a pegged exchange rate exists
when the government ties the country’s currency to a single currency or
to a basket of other currencies.
• The Central Bank intervenes in the foreign exchange market to maintain
the peg.
• The OECS dollar is pegged to the US dollar at the rate EC$2.70=US$1

7. Managed float
• Under this system the government
sets a range within which the
currency is allowed to float.
• Trinidad and Tobago have a
managed float regime to the US
dollar.

8. Eh, should we
adjust the
exchange rate?
It dropping
Not yet it hasn’t
reached the
minimum rate
yet!