Under a hard peg,

Question

Under a hard peg,

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Under a hard peg, a country commits to a fixed nominal exchange rate for an indefinite period of time. This means that the value of the currency is pegged to another currency or a basket of currencies, and the central bank must maintain the peg by buying or selling its own currency in foreign exchange markets. There is no government intervention to target the nominal exchange rate, and only the central bank can alter the value of the exchange rate as required, not the federal government. Hard pegs are typically adopted by countries with relatively stable and strong economies, and are usually only used by small economies or countries heavily reliant on imports.

Under a Hard Peg