An  exchange-rate regime  is the way an authority manages its currency in relation to other currencies and the foreign exchange market. It is closely related to monetary policy Exchange rate is defined as the price of a nation’s currency in terms of another (foreign) currency. In another word an exchange rate is the unit of domestic currency necessary to give up to get one unit of foreign currency. There are two types of exchange rate: Fixed and Flexible. Flexible Exchange Rate Flexible exchange rate also called as a floating exchange rate is such an exchange rate which is determined by market forces. It is the exchange rate determined by demand for foreign currency and supply of the foreign currency in currency market. Floating rates are the most common exchange rate regime today. For example, the dollar, euro,   yen, and   British pound   all are floating currencies with Nepalese rupee. However, since central banks frequently intervene to a...

The   balance of payments   (BOP) of a country is the record of all economic transactions between the residents of a country and the rest of the world in a particular period (a year). These transactions are made by individuals, firms and government bodies. Thus the balance of payments includes all external visible and non-visible transactions of a country during a given period, usually a year. It represents a summation of country's current demand and supply of the claims on foreign currencies and of foreign claims on its currency. ‘Balance of Payments’ is a term that is used to refer to an accounting record for all the monetary transactions conducted by a country with other countries within a specified period of time, usually one year. Balance of Payments is actually a numerical summary of all international transactions, and is preferably presented in the country’s domestic currency. In a balance of payments document, exports are recorded as positive items, due to the fact tha...

In today’s world, all countries import some goods and services from other countries, and they also export certain other goods and services which are surplus in their country.  A ‘balance of trade (BOT)’ is a relationship between the country’s imports and exports, in monetary value. Hence Balance of Trade (exchange) is the difference between the value of goods and services exported out of a country and the value of goods and services imported into the country. If a country has a balance of trade deficit, it imports more than it exports, and if it has a balance of trade surplus, it exports more than it imports. A country is said to be experiencing positive balance of trade, or surplus, if the value of its exports exceed the value of its imports. Conversely, a country is said to be in deficit, or to be having a negative balance of trade (exchange), if the value of its imports is higher than the value of its exports. Countries always tries to have a positive balance of trade. The balan...