
THE INTERNATIONAL MONETARY SYSTEM 57
• Sometimes, the exchange rate is determined by a government on the basis of certain
extraneous considerations, leading to trade wars in the international market.
• Although each fixed exchange rate regime has certain rules, a government may bypass
those rules for short-term gains.
• Exchange rate determined at the discretion of the monetary authority may also cause
uncertainty about the future exchange rates.
• As there is a free flow of goods, services, and investments across the countries, it may
not be possible for a country to manage its own economy without independent mon-
etary policy.