The managed floating system refers to the exchange rate system in which the authorities of a country intervene from time to time to make the country rise or fall in the direction that is beneficial to the country according to the needs of its economic interests.
Under a managed floating exchange rate system, the exchange rate fluctuates within a band determined by the monetary authority.
The managed floating exchange rate is based on market supply and demand. It is floating, not fixed.
The difference between it and free floating exchange rate is that it is managed by macro-control, that is, the monetary authority announces the exchange rate according to the price formed in the foreign exchange market and allows it to fluctuate within a specified range.
Once the exchange rate fluctuates beyond the prescribed range, the monetary authorities will enter the market to buy and sell foreign exchange and maintain a reasonable and relatively stable exchange rate.
