Abstract
M.Com. (Economics)
The objective of the thesis was to examine the relationship between the
rand exchange rate and the interest rate under the floating exchange
rate system.
A theoretical analysis of previous exchange rate regimes with a
particular emphasis on the floating exchange rate system was conducted.
At the end of the sixties it became evident that the limitations of the
fixed exchange rate system were such that it could no longer handle the
tensions which had developed in the international monetary system with
its great dependence on the US dollar as reserve currency and unit of
accounting.
The floating exchange rate system deregulates the international monetary
system. Market forces are allowed to play a more prominent role in
determining a price variable such as the exchange rate. This flexibility
has led to the globalization and internationalization of the
world's fund markets.