For a country which has a relatively high rate of inflation and wants some form of pegged exchange rate, which of the following exchange rate regimes is the best choice?

Question

Quizplus · Accepted Answer

With a relatively high rate of inflation, it would be difficult for a country to maintain a fully fixed exchange rate. Adjustable peg would require frequent adjustments and can also be prone to speculative attacks. A fully convertible exchange rate regime does not involve any form of pegging, so it is not an appropriate choice for this scenario. A crawling peg allows for some flexibility and periodic adjustments while still maintaining a general direction and stability in the exchange rate, making it the best choice in this case.

For a Country Which Has a Relatively High Rate of Inflation