A country that introduces a currency board commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate.

Question

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A country that introduces a currency board commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate. To make this commitment credible, the currency board holds reserves of foreign currency equal at the fixed exchange rate to at least 100 percent of the domestic currency issued.

A Country That Introduces a Currency Board Commits Itself to Converting