Adjustable Peg Exchange Rate  

 

Definition adjustable peg: An adjutable peg exchange rate is a system where a currency is fixed to a certain level against another strong currency such as the Dollar or Euro. Usually the peg involves a degree of flexibility of 2% against a certain level. However, if the exchange rate fluctuates by more than the agreed level, the Central bank needs to intervene to maintain the target exchange rate peg.

• An adjutable peg system usually allows countries to revalue their peg, if it is necessary to regain competitiveness.
• The adjustable peg is effectively a semi fixed exchange rate.
• The Bretton woods system of the 1960s and 1970s was an example of an adjustable peg system.
• Many asian countries have an unofficial peg against the dollar. However, with the weakening dollar, many countries are considering revaluing their target exchange rate

 

Related Essays and Revision Notes

• Factors influencing exchange rates
• Disadvantages of fixed exchange rates

 

• Economics Dictionary at Amazon.co.uk
• Economics Dictionaryat Amazon.com