Definition of Exchange Stability

The one of exchange stability is a concept that has a job excluding in the scope of economy, since with him it is called to the Balance, the stable and unchanged maintenance of exchange rates in a country.

In any country, in addition to the national legal tender, other foreign currencies circulate that have a value, so if one wants to acquire any of these currencies, for example the dollar or the Euro, which are undoubtedly the most widespread currencies in the world today, you will have to pay so many bills of your national currency to buy them.

It is common for the economic policies of a nation to have, among other objectives, maintaining stability exchange rate given that the exchange rate expresses the value of the currency of this or that country with respect to that of other. Meanwhile, a stable exchange rate undoubtedly tends to attract investments It is precisely in this reason that we find the answer to why countries pursue exchange rate stability as their goal.

There is a state body that is in charge of specifying the politics monetary state that is none other than the central bank. He just has the responsibilities of implementing policies and administering resources in this sense.
Central banks are certainly capable of influencing the price levels of their economy carrying out various regulations on interest rates or on the financial market, among others.

Then, the stable exchange rate is usually achieved when a country fixes its currency to that of another more stable nation, while the Bank Central will be the one who sets the pace of stability, being able to increase or decrease the offer.

Those who are more orthodox in terms of exchange rate stability strictly advocate that a rising inflationary situation will undoubtedly affect exchange rate stability. The depreciation suffered by a currency in a process of inflation will make people tend to take refuge in another currency that gives them a higher safety. And so, for this reason, those who defend this position censor and do not accept the existence of even a minimum inflation.