Most countries that implement floating exchange rate system in the world are developed capitalist countries such as the United States, Britain, Japan and Canada. Because these countries have good economic foundation and welfare, floating exchange rate changes are generally affordable to residents.

Most of the countries with fixed exchange rate system in the world are countries with weak economic foundation and relatively conservative politics, such as Cuba and North Korea. Because the living standards of these countries are generally low, in order to ensure the normal life of residents, a fixed exchange rate system is implemented.

Floating exchange rate system floating exchange rate system refers to the exchange rate at which one country's currency floats freely against another country's currency according to the relationship between supply and demand in the foreign exchange market. Relatively speaking, floating exchange rate system and "fixed exchange rate system", when the supply exceeds the demand, the exchange rate will go down; When demand exceeds supply, the exchange rate will rise.

Advantages and disadvantages of floating exchange rate system

Advantages:

1. Imbalance of payments can be adjusted spontaneously.

2. It can make countries get rid of the constraint of fixed exchange rate on economic policy autonomy and avoid the international transmission of inflation.

3. Help to improve resource allocation.

4. As countries do not undertake the obligation of maintaining exchange rate stability, foreign exchange funds can be saved.

5. Because the balance of payments of all countries can be adjusted automatically, the international financial panic is avoided and the stability of the foreign exchange market is guaranteed to some extent.

Disadvantages:

1. The instability of exchange rate increases the risk of international trade, expands the risk of international trade calculation and international cost settlement, and thus hinders the normal development of international trade.

2. International liquidity and unstable commodity prices.

3. Free floating of exchange rate cannot isolate the interference of foreign economy on domestic economy.

To some extent, it encourages speculation in the foreign exchange market.

Fixed exchange rate refers to the exchange rate between one country's currency and another country's currency is basically fixed.

Advantages of fixed exchange rate system

Advantages:

1. The main advantage of the fixed exchange rate system is to reduce the uncertainty of economic activities.

2. Stabilize international liquidity and import and export commodity prices.

3. The stability of exchange rate can also restrain the speculation in the foreign exchange market to some extent.