To bring about stability in their external accounts, countries have entered into various exchange rate arrangements.

One prominent arrangement is the Fixed Exchange Rate System. Under this system, the government maintains the exchange rate at a specified level. To manage a deficit in the Balance of Payments (BoP), the government must intervene using its official reserves. However, this system requires high credibility. If the public believes reserves are inadequate, it may lead to a speculative attack, forcing the government to devalue the currency, a issue witnessed before the collapse of the Bretton Woods System.

Another arrangement is the Flexible Exchange Rate System. This system provides the government with more flexibility as they are not required to maintain large stocks of foreign exchange reserves. A major advantage is that movements in the exchange rate automatically correct the surpluses and deficits in the BoP. Furthermore, countries gain independence in conducting their monetary policies since they do not need to intervene to maintain the rate.

Additionally, countries use Managed Floating. In this arrangement, the central bank may intervene in the foreign exchange market to moderate fluctuations, combining elements of both fixed and flexible systems to ensure stability.