Question

In: Economics

what is the main differences between the Finnish Markka case and the swiss Franc case ?...

what is the main differences between the Finnish Markka case and the swiss Franc case ?

in a perspective of exchange rate systems

Solutions

Expert Solution

The Swiss franc was combined of the Bretton Woods exchange rate system that was settled in the aftermath of World War II and lasted until the early 1970s. The currency's exchange rate was fixed to the price of gold until a mandate in May 2000. Between 2003 to 2006, the Swiss franc was fixed against the euro.

The Finnish markka was the currency of Finland from 1860 until 28 February 2002, when it ended to be legal tender.

As regards exchange rate policy, almost all variations of exchange rate system were tried. A fixed rate system based on a currency index fell apart in the early part of the decade and was taken by a floating rate system. Later, in 1993, this was merged with an inflation-targeting monetary policy strategy. At the beginning of 1995 Finland united the European Union, and in October 1996 the markka was joined to the EU’s Exchange Rate Mechanism. The development in financial and price stability that followed the economic crisis smoothed the adjustment to the euro area’s single currency and single monetary policy at the start of 1999, which was consumeted without serious problems.


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