Which of the following is a feature of the 'Fear of Floating' phenomenon identified by Calvo and Reinhart?
A. All countries freely float without intervention
B. Only advanced economies fear floating
C. Many emerging-market countries that claim to float actually intervene heavily to limit exchange-rate volatility
D. Floating is always preferred to pegging
Answer: Option C
Solution (By JKSSB Mock Tests)
Fear of floating describes the empirical regularity that many countries officially classified as floaters in fact intervene frequently and allow only limited exchange-rate variability, often because of balance-sheet vulnerabilities.
Explanation:
Indian fiscal federalism involves constitutional division of tax bases between the Centre and States, with the Finance Commission recommending the sharing of divisible taxes and grants.
Explanation:
A soft currency is one that is less widely used in international trade and finance and may experience greater volatility or convertibility restrictions compared with hard currencies.
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