Currency Pegs

A currency peg is a financial policy where a country ties its currency's value to another, usually a stable one like the US dollar or euro. This means the country will maintain its currency's exchange rate within a specific range of the pegged currency. By doing this, the country aims to stabilize its economy, control inflation, and create predictable trade conditions. However, managing a peg can be challenging, especially if economic conditions change, as it requires the government to use its reserves to maintain the fixed rate.