For the purpose of this monograph, the fluctuation of exchange rates means all the movements in exchange rates that are possible under the exchange arrangements in force in the discretionary system. A characteristic of such a system is that it makes predictability of exchange rate behavior extremely difficult. This difficulty generates problems for parties engaged in international payments. They have to be aware that wide and erratic variations can take place in the exchange rates that affect their costs, revenues, and profit margins.

Author: Mr. Joseph Gold