Contribute to exchange rate volatility


Problem: I have read and re-read the text in regards to flexible exchange rates. I still can not understand why the major complaint regarding flexible exchange rates is that the exchange rates are too volatile when they float.

Please explain each of the topics: the trade balance, currency substitution, differential speed of adjustment of asset markets versus goods markets, news, and market microstructure effects contributes to exchange rate volatility. Please be detailed.

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Finance Basics: Contribute to exchange rate volatility
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