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Foreign Exchange System

In every country there is a system of foreign exchange rates are determined by the policy adopted by the government of each country.
According to Floyd A. Beam: "... Consider the exchange rate behavior under three different kinds of exchange systems: floating, fixed, and controlled." (Floyd A. Beam 2003: 390-391)
Above opinion states that there are three systems of foreign exchange rates used by the state, namely:
a. Free exchange rate system, in this system there is no government intervention to stabilize the exchange rate. The exchange rate is determined by supply and demand for foreign exchange.
b. Fixed exchange rate system, in this system the government or the central bank of the country concerned to actively intervene in the foreign exchange market by buying or selling foreign currency if the value deviates from the specified standard.
c. Exchange rate system controlled / uncontrolled, in this system the government or the central bank of the country concerned has the exclusive power to determine the allocation of the use of foreign exchange available. Citizens are not free to intervene in foreign exchange transactions. Capital inflows and exports of goods led to the availability of foreign exchange.
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