Uk's Exchange Rate System

Exchange Rate System

Of

United Kingdom

International Financial Management

(FIN 480)

Submitted To:

Mohammad Nayeem Abdullah

Instructor

Submitted By:

Saema Chowdhury

I.D. ≠≠ 0511003

Date: 23rd November, 2008

United Kingdom

The United Kingdom has a mixed economy, which has been ranked 5th largest in the world in terms of market exchange rates and the 6th largest by purchasing power parity (PPP). It is considered the 2nd largest economy in Europe after Germany's. Its GDP PPP per capita in 2007 is the 22nd highest in the world. The United Kingdom is one of the world's most globalize countries. The capital, London, is the major financial centre of the world, in front of New York City, Hong Kong and Singapore according to a report compiled by the City of London. The British economy is made up (in descending order of size) of the economies of England, Scotland, Wales and Northern Ireland. The UK became a member state of the European Community, in 1973, and ratified the Maastricht Treaty making it a European Union state, at the inception of the EU in 1993.

✓ The pound sterling of the United Kingdom is regarded as one of the major currencies of the world next to the Euro and the United States dollar. This is a fact that is borne out by the remarkable foreign exchange rate of the UK pound sterling in the global foreign exchange market.

Exchange Rate System

The matter of choosing an exchange rate system is simply a sub-issue in the broader question of overall economic policy. And while economic policy is clearly essential, its function can be easily showy, as Milton Friedman (1968) pointed out more than three decades ago.

• Fixed & Floating Exchange Rate

In a fixed exchange rate system, the government intervenes in the currency market so that the exchange rate stays close to an exchange rate target. When Britain joined the European Exchange Rate Mechanism in October 1990, we fixed sterling against other European...