Veodaphone in India

1.) Pros for a Fixed/Pegged Rate:

Countries prefer a fixed exchange rate regime for the purposes of export and trade. By controlling its domestic currency a country can – and will more often than not – keep its exchange rate low. This helps to support the competitiveness of its goods as they are sold abroad. But the real advantage is seen in trade relationships between countries with low costs of production and economies with stronger comparative currencies. When Chinese Argentine manufacturers translate their earnings back to their respective countries, there is an even greater amount of profit that is made through the exchange rate. So, keeping the exchange rate low ensures a domestic product's competitiveness abroad and profitability at home. 

The fixed exchange rate dynamic not only adds to a company's earnings outlook, it also supports a rising standard of living and overall economic growth. But that's not all. Governments that have also sided with the idea of a fixed, or pegged, exchange rate are looking to protect their domestic economies. Foreign exchange swings have been known to adversely affect an economy and its growth outlook. And, by shielding the domestic currency from volatile swings, governments can reduce the likelihood of a currency crisis. 

Cons of a Fixed/Pegged Rate:

Yes, there is a downside to a fixed or pegged currency. This type of currency regime isn't all positive. There is a price that governments pay when implementing a fixed or pegged exchange rate in their countries.

A common element with all fixed or pegged foreign exchange regimes is the need to maintain the fixed exchange rate. This requires large amounts of reserves as the country's government or central bank is constantly buying or selling the domestic currency. The problem with huge currency reserves is that the massive amount of funds or capital that is being created can create unwanted economic side effects – namely higher inflation. The more currency reserves there...