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A managed float regime, also known as a dirty float, is a type of exchange rate regime where a currency's value is allowed to fluctuate in response to foreign-exchange market mechanisms (i.e., supply and demand), but the central bank or monetary authority of the country intervenes occasionally to stabilize or steer the currency's value in a particular direction. This is in contrast to a pure float where the value is entirely determined by market forces, and a fixed exchange rate where the value is pegged to another currency or a basket of currencies.

Under a managed float regime, the central bank might buy or sell its own currency in the foreign exchange market to counteract short-term fluctuations, to prevent excessive depreciation or appreciation, or to achieve certain economic goals such as controlling inflation or boosting exports.

In an increasingly integrated world economy, the currency rates impact any given country's economy through the trade balance. In this aspect, almost all currencies are managed since central banks or governments intervene to influence the value of their currencies. According to the International Monetary Fund, as of 2014, 82 countries and regions used a managed float, or 43% of all countries, constituting a plurality amongst exchange rate regime types.[1]

International financial organizations, like the IMF, categorize countries' exchange rate regimes based on specific criteria, but these classifications aren't necessarily objective and may not fully capture the nuances of a country's exchange rate policies. For example, a country may normally have a floating exchange rate regime but intervene in times of extreme volatility, a country may formally claim to be following one exchange rate regime (de jure) while having another in practice (de facto).

United States for instance, claims to follow a floating exchange rate regime and does not typically engage in direct intervention to set exchange rates. However, its economic policies, the role of the U.S. Dollar as a global reserve currency, and the sheer size of the US economy give it a significant indirect influence on global exchange rates and financial markets.

For more detail on each countries' exchange rate regime it is recommended to read IMF's Annual Report on Exchange Arrangements and Exchange Restrictions.

List of countries with managed floating currencies

Map of current exchange rate regimes (2018) De facto exchange-rate arrangements in 2018 as classified by the International Monetary Fund.
  Floating (floating and free floating)
  Soft pegs (conventional peg, stabilized arrangement, crawling peg, crawl-like arrangement, pegged exchange rate within horizontal bands)
  Residual (other managed arrangement)
Source IMF as of April 31, 2008

See also

References

  1. ↑ "IMF finds more countries adopting managed floating exchange rate system". Nikkei Asian Review. Nikkei. August 19, 2014. Retrieved 5 March 2015.
  2. ↑ Japanese yen
  3. ↑ "Floating of the TT dollar: 20 years later". Trinidad Express Newspaper. April 2, 2013. Archived from the original on April 5, 2013.
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