It has been shown that countries with pegged exchange rates have a lower annual inflation rate than countries with floating regimes.

Question

Quizplus · Accepted Answer

Countries with pegged exchange rates have a lower annual inflation rate than countries with floating regimes because the central bank can intervene in the foreign exchange market to keep the exchange rate within a target range. This helps to stabilize the prices of imported goods and services, which in turn helps to keep inflation low.

It Has Been Shown That Countries with Pegged Exchange Rates