Finance, Forex and Investments

Why would a country choose to have a fixed exchange rate?

Why would a small, exporting country choose a fixed over a flexible exchange rate?

Public Comments

1. to keep the product competitive with other countries. in other words, to screw up other country's economy...if the currency value goes up the product will face competition in a foreign and local market...China, with the support of USA, is good at doing it for years. The third world countries are getting screwed up because of that...
2. I suppose you're speaking of China? If not it'll still be a good example for answering your question either way. China for the last 15 or some years have been using a soft peg on their currency, R&B. This means the value of their currency is manage by the government. They've done this to directly affect their exporting and production sector. With a "stable" currency the country can attract more exporting business, which can increase that country's GDP and still strenghen their GNP.