International macroeconomics distinguishes two exchange rate regimes: a floating exchange rate, in which the market-clearing intersection of currency supply and demand sets the rate and shifts in either curve produce appreciation or depreciation, and a fixed (pegged) exchange rate, in which a government suppresses market adjustment to hold one currency's value against another at a target level or within a target band. Maintaining a peg requires the authority to shift the supply of or demand for its own currency in the foreign exchange market, achievable through interest rate policy that alters capital inflows, direct central bank purchases of foreign currency that expand the supply of domestic currency, or foreign exchange controls that restrict permissible transactions. The topic sits within open-economy macroeconomics as a specific instance of the discipline's general question of market determination versus government intervention, alongside price controls, fiscal policy, and monetary policy.
International macroeconomics distinguishes two exchange rate regimes: a floating exchange rate, in which the market-clearing intersection of currency supply and demand sets the rate and shifts in eit…