This paper tries to find out the real causes of volatility in foreign exchange market in Bangladesh. For this purpose, performance of dollar based fiat currency regime compared to gold standard regime is analyzed, furnishing statistical data. Fixed, Pegged or floating exchange rate regime in this country have been behaving identically over the last forty years after independence and the dollar appreciated about 1200% during this period. The dollar based monetary system which is not backed by any real value makes the economy over a bubble one due to its unstable nature of inflation and interest rate. As a result, changing exchange rate system, government intervention or nonintervention is not the answer to this instability. Gold based stable currency is the perfect solution as it holds intrinsic value and makes the exchange rate smooth in international trade.

Download Paper

Download

Hasan, T. (2012) Dollar Based Exchange Rate System and Foreign Exchange Market Volatility in Bangladesh. Skyline Business Journal, Volume 8, Issue 1, pp 12-16.