The Theoretical Analyses of Fixed and Floating Exchange Rates

The essay studies equilibrium exchange rate models based on optimal equilibrium theory. They can be divided into three equilibrium states, gross analyses and individual analyses. By applying mathematic models the change trends of exchange rate, domestic and foreign commodity prices are analysed in the three equilibrium states. Exchange rate is influenced by productivity, monetary policy, inflation, and has counteractive to these changes of domestic economy. Later supposed exchange rate is fixed, the equilibrium terms of relative variables are studied. What relations of each variable should have when commodity markets, foreign exchange markets and financial markets between nations implement equilibria is expatiated theoretically.