Question

Background:

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(The final assessment is applied in nature and encourages you to use the tools developed in the course content to analyse and make sense of the world around you. In 2020 economies around the world have experienced unprecedented shocks to their internal and external balance situations driven by necessary closures and shutdowns of economic activity to deal with the Covid 19 health crisis. Recovery from deep Global crisis can be uneven and some economies are better positioned to recover than others. Your final assessment task for IME is to apply the theory developed in the course to the current world events from the Australian Perspective)

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Choice of exchange rate regime – has Australia's exchange rate mechanism helped or hindered recovery (250 words):

Answer 1

Australia use Mostly Floating Exchange Rate Regime, which always helping to them for recovery. Government of Australia always give preference to use Floating exchange rate instead of fixed exchange rate, Australia Government use floating exchange rate cause, they leave the monetary and fiscal authority free to perceive internal activities.

For example - Employment Growth Stability, and Price Stability, and they can adjust AUD Exchange rate often it works as a Automatic Stabilizer to promote those Activity or goals,

From 1983 Australia Government accepted floating exchange rate because it was beneficial for them, this is provided a Buffer against external shocks for particular shifts in the form of trade allowing the economy to accept them without creating the large influence, which can tendered to result in Previous fixed exchange rate regimes because of that Australian government always use floating exchange rate. Cause of in 2008 Australia did not affect Recession which is start from USA.

If Discretionary changes made value of the Australian dollar in previous regime then and it give response to developing pressure and it was extremely difficult to adjust to provide an effective buffer opposite the shocks and floating exchange rate are which contributed to the reduction in output volatility compared to past decades,

It has identified enable the Reserve Bank to set monetary policies which is always suited to domestic conditions compared to leading to achieve target level for the exchange rate,

Because of that thing Australian government use floating Exchange rate Regime, which Always help the to recover their economy.