fixed E,R

• ​fixed system?

  when a government/ central bank sets their currency against another and that exchange rate does not change.
• what does a fixed E.R involve?

  maintaining the exchange rate at a target rate
• how do the govt/ central bank maintain their E.R at the target rate?

  controlling I.R by buying and selling currency (using foreign currency reserves) to keep supply and demand for the currency stable
• how can country can decide to devalue its currency overnight through a fixed E.R system?

  improve international competitiveness of its industry.
• example of devaluing currency overnight?

  ​gold standard​, where each major trading country made its currency convertible into gold at a fixed rate. Today, no country uses the gold standard.