The system by which exchange rates between different currencies are determined. There are a number of possible systems, ranging from the gold standard, under which all countries are permanently committed to maintaining fixed exchange rates, to a freely floating system in which no effort is made to stabilize exchange rates, which are left to be determined entirely by market forces. Under the gold standard each country makes its currency convertible into gold at a fixed price, or the central bank operates buying and selling prices which differ only by a small percentage, and trade in gold is not controlled. The exchange rate between two currencies on the gold standard cannot move far from par, since this would make it profitable for arbitrageurs to buy gold from one central bank and sell it to the other. Under the Bretton Woods system, which operated from after the Second World War until 1971, countries registered par values for their currencies with the International Monetary Fund, and undertook to keep market exchange rates within a small margin of variation from these rates. The difference from the gold standard was that countries retained the right to change their par rates in the event of ‘fundamental disequilibrium’, which was never defined. This ‘adjustable peg’ system meant that government commitment to existing par rates lacked credibility, so that speculators frequently forced countries with weak currencies to devalue. Since 1973 the world has been on a flexible exchange rate system. As governments are worried that speculation might lead to violent instability in exchange rates, floating is generally not ‘pure’ or ‘clean’, but ‘managed’ or ‘dirty’, with considerable intervention by central banks to try to limit fluctuations in exchange rates, not always successfully. Under a generally adopted fixed exchange rate system, each country has a choice as to whether to join it or opt for flexible rates. Under a floating rate system, no country has this choice: if other currencies are all floating against each other, a single country can choose to peg its exchange rate with some other, usually a larger country with which it does much of its trade. Some smaller countries peg their currencies to the US dollar but their exchange rates with all other currencies still float. Alternatively, they can peg their currencies to a basket of other currencies: the rates with any single currency will still float. It is possible for a group of countries to decide to link their currencies, as was the case with the Exchange Rate Mechanism of the European Monetary System. This still leaves them floating relative to the currencies of non-member countries, such as the US dollar. Where a country decides to manage its exchange rate, this can be done either by discretionary action by the central bank, or by setting down rules about the procedure to be followed, for example a ‘crawling peg’ system, which attempts simply to slow down changes rather than aiming at any fixed target.