Would the central bank need to intervene in a managed floating system? Explain why.
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Would the central bank need to intervene in a managed floating system? Explain why.
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: A managed floating system is one in which market forces determine the foreign exchange rate. Through involvement in the international market, the central bank or government can influence the currency rate. It aids in the stabilization of exchange rates by facilitating the acquisition and sale of foreign money. It provides for exchange rate adjustments by established norms and regulations that are publicly reported in the foreign market.

 1. It is a cross between a fixed and a variable exchange rate system.

2. In this system, the central bank intervenes in the foreign exchange market to keep exchange rate swings within predetermined bounds. The goal is to keep the exchange rate as near to zero as possible.

 3. To do this, the central bank maintains foreign exchange reserves to ensure that the exchange rate remains within the desired range.

4. It's called 'Dirty Floating.'
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