Advocates of a floating regime, partly influenced by Canada’s favourable experience with such a system in the 1950s, suggested that exchange rates would automatically adjust to correct external imbalances in an orderly and continuous manner. And this would give domestic policymakers greater freedom than under the pegged rate system as well as obviate the need for official intervention and large international reserves.
Experience with the floating rate system Needless to say, experience under the floating rate system has not been problem-free. Events did not unfold quite as its proponents had suggested, and the past 25 years have been characterized by volatile short-term movements and sizable long-term swings in most of the major currencies.