Economics Exchange Rate Systems Questions
Exchange rate volatility refers to the degree of fluctuation or instability in the value of one currency relative to another currency. It measures the rate at which exchange rates change over a given period of time. Higher exchange rate volatility indicates greater uncertainty and risk in the foreign exchange market. Factors such as economic conditions, interest rates, inflation, political stability, and market speculation can all contribute to exchange rate volatility. This volatility can have significant impacts on international trade, investment, and financial markets, as it affects the competitiveness of exports and imports, the profitability of multinational corporations, and the stability of financial flows between countries.