Critics of a floating exchange rate regime argue that speculation causes stability in exchange rates.

Question

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Critics of a floating exchange rate regime argue that speculation causes instability in exchange rates, not stability. This is because speculators can drive up or down the value of a currency based on their expectations, rather than actual economic fundamentals. This can create fluctuations in exchange rates that are not necessarily reflective of the underlying strength of the economy.

Critics of a Floating Exchange Rate Regime Argue That Speculation