JMGT_V6_N1_RP3 Koti Reddy Tamma Journal on Management 2230 – 715X 6 1 31 48 Exchange Rate Policies, Current Account Deficit, Differentials in Interest Rate, Political Stability and Economic Performance This research paper discusses the role of exchange rate policies, the role of regulating bodies of different countries whether developed or developing nations in achieving trade balance. In the era of globalised world each nation has trade relationship with various other nations and hence the exchange rate policies are very important in influencing the trade balances. The paper also discuss about the notion of external balances like current account deficit or surplus which is independent of outcome of the financial market because the policy of nation may be to borrow money to finance investment, or in some cases, consumption. June - August 2011 Copyright © 2011 i-manager publications. All rights reserved. i-manager Publications http://www.imanagerpublications.com/Article.aspx?ArticleId=1501