Demerits/Disadvantages of floating the currency in economy
- It leads to uncertainty in forex market
- It encourages speculation
- It leads to inflations
- It leads to fluctuation of foreign exchange earnings.
- Lack of Investment: The uncertainty introduced by floating exchange rates may discourage direct foreign investment (i.e., investment by multinational companies).
- May lead to crisis: there is a possibility that with a floating exchange rate such short-run problems as domestic inflation may be ignored until they have created crisis situations.
- May lead to instability of prices
CATEGORIES Economics
TAGS Dr. Bbosa Science
