ads/dis of floating E.R

• how can floating E.R's fluctuating be a disadvantage?

  can fluctuate widely, making business planning difficult
• how are foreign currency reserves an advantage for floating E.R?

  floating E.R reduces the need for currency reserves

  Fixed E.R - central banks require foreign currency reserves to intervene and maintain E.R target
• how is a floating E.R reducing a BOP current account deficit an advantage?

  B.O.P deficit leads to a fall in the value of a currency so if demand for Exports and imports moderately price elastic, exports increase and imports decrease reducing deficit
• how can speculation disadvantage floating E.R?

  artificially strengthen the E.R causing a country to lose competitiveness as domestic goods become over-priced
• how can inflationary pressures be a disadvantage to floating E.R?

  fall in E.R leads to inflationary pressures

  if demand for imports tends to be price inelastic
• how does no use of monetary policy an adv of float systems?

  floating E.R means govt doesn't need to use monetary policy