Announcing a target exchange rate is sufficient to fix the exchange rate at its pegged value.

Question

Quizplus · Accepted Answer

Announcing a target exchange rate is not sufficient to fix the exchange rate at its pegged value. It also requires appropriate monetary policy tools and interventions by the central bank to ensure that the exchange rate remains at its pegged value. Factors such as changes in supply and demand for the currency, economic conditions, and external shocks can affect the exchange rate, so continuous monitoring and intervention may be necessary to maintain the exchange rate at its target level.

Announcing a Target Exchange Rate Is Sufficient to Fix the Exchange