what are the advantages and disadvantages of a floating exchange rate?

Answer 1

A fixed exchange rate means that the central bank is willing to make open-market trades of currency in order to maintain the exchange rate within a certain range.

The advantage of its opposite (rate float), then, is that it frees up the nation's monetary policy to manage things like inflation and interest rates.

The disadvantage is volatility in the currency exchange rates (although fixed rates foster economic volatility by preventing control of some macroeconomic variables).

Answer 2

if a country floats the exchange rate, then the value of the currency will depend on the world market demand for the currency. it will be traded in an open money market in which any person/government/entity can buy the currency. In contrast if a currency is not floated the country has to maintain a surplus of cash in order to account for the fluctuation in the currency's value. This ties up money that could otherwise be productively invested in antoher part of the economy.