Definition of Dirty float:
This can be contrasted with a clean float, where the central bank does not intervene.
A dirty float is a floating exchange rate where a country's central bank occasionally intervenes to change the direction or the pace of change of a country's currency value. In most instances, the central bank in a dirty float system acts as a buffer against an external economic shock before its effects become disruptive to the domestic economy. A dirty float is also known as a "managed float.".
Floating currency exchange rate system which is not controlled entirely by the market forces of demand and supply. Instead, it is at least partially controlled by government intervention that limits appreciation or depreciation of the currency within a range. Also called managed float.
How to use Dirty float in a sentence?
- Dirty, or managed floats are used when a country establishes a currency band or currency board.
- The goal of a dirty float is to keep currency volatility low and promote economic stability.
- With a dirty float, the exchange rate is allowed to fluctuate on the open market, but the central bank can intervene to keep it within a certain range, or prevent it from trending in an unfavorable direction.
- A dirty float occurs when government's monetary rules or laws affect the pricing of its currency.
Meaning of Dirty float & Dirty float Definition