Crawling pegs

The way a country manages its currency in respect to foreign currencies and the foreign exchange market is referred to as the exchange rate regime. It has a close relation with monetary policy and the factors on which the two depends are generally the same.

The basic types of exchange rate regime are

• floating exchange rate, where the movements of the exchange rate are dictated by the market,
• pegged float, where the central bank is the authority that keeps the rate from deviating too far from a target band or value,
• fixed exchange rate, by which the currency is tied to another currency, mostly more widespread currencies such as the U.S. dollar or the euro.

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Tagged as: bank, Crawling bands, Crawling pegs, currency, Currency board, currency board arrangement, Dollarization, exchange rate regime, fixed exchange rate, Floating rates, foreign currencies, foreign exchange market, foreign reserves, pegged float, Pegged with horizontal bands

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