Info about Mortgages

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Drawbacks Of Floating Rates

Claimed drawbacks to floating rates

The benefits of joining a common currency are:

-Frequent appreciation and depreciation of a currency against others causes industry many problems.

These include:
-fluctuating prices of imported raw materials and components making costing of products difficult.
-fluctuations in export prices and overseas competitiveness which lead to unstable levels of demand
-uncertainity over profits to be earned from trading abroad or from investing abroad.


-When firms are planning to purchase good sfrom abroad it is difficult to make cost comparisions
because suppliers from different countries will be using different currencies. These may change
from one month to another.This means the cost differences are not clear as there is no price
transparency as there would be if all suppliers used the same currency.


-Having different exchange rates adds considerablyto the costs of firms trading overseases
due to currencies being converted into the domestic currency which involves comission to the
bank, also possibility of different price lists and attemps to take out risk of dealing in different
currencies by using contracts.

-The world economy has become increasingly dependent on overseas investment, which means
foreign currency to the country.


-Business strategy may have to adopt to the country remaining outside the common currency.
For example to avoid currency costs and risks, businesses that trade extensively in Europe may
decide to relocate into a euro zone country.