Yes, a country can switch between different Exchange Rate Systems. However, transitioning between systems can have profound implications. Moving from a fixed to a floating system can lead to increased volatility in the exchange rate and inflation due to initial market adjustments, but can offer more flexibility in monetary policy in the long run. Conversely, adopting a fixed rate can bring stability to the exchange rate but at the expense of autonomy in monetary policy and the need for substantial foreign reserves. Such transitions require meticulous planning and communication to manage market expectations and avoid unnecessary disruptions.

Exchange Rate Systems can have a substantial impact on FDI. A Fixed Exchange Rate System can provide a stable environment for foreign investors by reducing exchange rate risk, potentially attracting more FDI. However, the restrictions on monetary policy and the need to maintain currency pegs can lead to economic imbalances, which can deter investment. Conversely, while a Floating Exchange Rate System can lead to currency value fluctuations, increasing risks, it allows for autonomous monetary policy adjustments, which can create a more balanced and responsive economic environment, potentially making the country an attractive destination for FDI.

Under Managed Float Systems, central banks decide to intervene based on their assessment of currency value misalignments and their impact on economic stability and goals. Intervention may occur if there is excessive volatility or rapid appreciation or depreciation of the currency that can adversely affect trade balances, inflation, employment, or economic growth. Central banks may also intervene to control speculative movements in the currency market, to maintain competitiveness, or to avoid abrupt adjustments in the real exchange rate that could be disruptive to the economy.

In a Floating Exchange Rate System, the value of the currency is determined by supply and demand forces in the foreign exchange market. When a currency depreciates, import prices rise, contributing to cost-push inflation. Conversely, an appreciating currency makes imports cheaper, potentially reducing inflation. Central banks might respond to changes in inflation expectations by adjusting interest rates. For instance, to combat rising inflation due to currency depreciation, a central bank might raise interest rates to attract foreign capital and support the currency, and vice versa.

Countries with Fixed Exchange Rate Systems often respond to speculative attacks by utilising their foreign exchange reserves to buy back their own currency to maintain the fixed rate. They might also adjust interest rates to make their currency more attractive to investors. However, persistent speculative attacks can deplete reserves and can necessitate a devaluation of the currency. Devaluation can help in restoring competitiveness but might lead to inflation and loss of investor confidence. Countries might also implement capital controls to limit the movement of funds across borders, thereby reducing speculation.