Present the case for and the case against a system of floating exchange rates.

Floating exchange rates refers to a regime where the currency price is set by the forex market on the basis of supply and demand as compared with other currencies. This is in contrast to a fixed exchange rate, where the government entirely or predominantly determines the rate.

1. Market-Determined Rates: In floating exchange rate systems, currency rates are determined by market forces and therefore are most likely to reflect the actual value of the currency based on current economic conditions. 2. Automatic Adjustment: Floating exchange rates can help rectify trade imbalances. If a country's goods are too expensive due to high prices for its currency, the fall in demand can lead to depreciation of the currency and the prices becoming more competitive, thus rebalancing trade. 3. Independence over Domestic Policy: It allows a country to maintain full control over its domestic monetary policy, without having to maintain exchange rates within specified limits or sacrifice goals for unemployment or inflation.

1. Exchange Rate Volatility: Floating exchange rates can be highly volatile leading to economic uncertainty. Frequent fluctuations in exchange rates can create instability in the global economy. 2. Trade and Investment Impact: Unpredictable exchange rates can negatively impact foreign trade and investment, as companies struggle to hedge against sudden exchange rate shifts that could negatively impact profits. 3. Threat of 'Currency Wars': Under a floating system, there's a risk of competitive devaluations which could lead to a 'currency war'. Countries may competitively devalue their currencies to secure an advantage in global trade which could lead to economic instability or crisis.