Economics Exchange Rate Systems Questions Medium
A pegged exchange rate is a fixed exchange rate system in which a country's currency is tied or pegged to the value of another currency, a basket of currencies, or a commodity such as gold. The central bank or monetary authority of the country sets a specific exchange rate at which its currency can be exchanged for the pegged currency or currencies. The pegged exchange rate is maintained by the central bank through buying or selling its own currency in the foreign exchange market to ensure that the exchange rate remains within the predetermined range. This system is used to stabilize the value of a country's currency, promote trade and investment, and maintain economic stability.