A PROJECT REPORT ON FLEXIBLE EXCHANGE RATE IN PARTIAL FULFILLEMENT OF THE DEGREE OF MASTER OF COMMERCE BANKING & FINANCE SEMESTER

II (2012-2013) SUBMITTED BY MARIDAS NATRAJAN ROLL NO. 01 SUBJECT NAME: ECONOMICS OF GLOBAL TRADE & FINANCE UNDER THE GUIDANCE OF MRS. RAJAM RAJGOPALAN

SIES COLLEGE OF COMMERCE AND ECONOMICS, Plot No. 71/72, Sion Matunga Estate T.V. Chidambaram Marg, Sion (East), Mumbai 400022.

CERTIFICATE
This is to certify that Mr. /Ms. ____________________________________of

M.Com Banking & Finance Semester II (2012-2013) has successfully

completed the project work entitled __________________________________________________________________ Under the guidance of _________________________________ _

____________________
Project Guide/ Internal Examiner (MR. RAJAM RAJGOPALAN)

_____________________
External Examiner ( )

____________________
Course Co-ordinator (MRS.SHAILASHRI UCHIL) DATE: PLACE:

____________________
PRINCIPAL (DR. MINU THOMAS)

DECLARATION

I, __________________________, the student of M.com (Banking & Finance) semester II (2012-2013) hereby declare that I have completed the project on _________________________________________________________ The information presented through this project is true and original to the best of my knowledge.

______________ Date : Place: MARIDAS NATRAJAN Roll no. 01

ACKNOWLEDGEMENT
A project is the fruit of experiment and experience and it goes a long way to modeling a person and gaining a new insight in that field of research. In this rewarding experience, one recognizes the help and support rendered by kind heart behind its success. I express my gratitude to our Principal, Dr. Minu Thomas for being a constant source of support and for always being there whenever we students need her guidance. I would take this opportunity to thank all my teachers, especially Mrs. Shailashri Uchil, the co-ordinator of M.Com (Banking &Finance). I would like to thank, Mrs.Rajam Rajgopalan my project guide, who sincerely guided and supported me in doing the project.

I would also like to show my gratitude towards my family, friends and all others who have helped and supported me in doing the project.

(Maridas Natrajan)

Table of contents
Chapter No 1. 2. 2.1 2.2 2.3 2.4 2.5 3. 3.1 3.2 4. 4.1 4.2 4.3 5. 5.1 6. 7. 7.1 7.2 7.3 8. 9. 10. 11. 12. Introduction Present Flexible Exchange Rate System Fixed (Pegged) with one currency (Hard peg) Free Float Managed Float Currency Board Co-operative like European Union Reason for failure of Flexible Exchange Rate Advantages of Flexible Exchange Rate Disadvantages of Flexible Exchange Rate World Monetary and Exchange Rate System Gold specie Standard Gold Bullion standard Gold Exchange Standard Bretton Woods System Collapse of Bretton Woods System Determination of Exchange Rate System Exchange Rate Mechanism-Theories Approaches and Model Theories in Foreign Exchange Assumptions of the Theory Criticisms of (Purchasing Power Parity) PPP Arguments in Favour of Flexible Exchange Rate Arguments Against Flexible Exchange Rate Managed Flexible Exchange Rate Conclusion References 26-27 28-29 30-31 32 33 22 23-25 19-21 9-18 8-12 Topic Page no 1-2 3-7