All of the following are advantages of currency pegging EXCEPT
A) it reduces exchange rate risk.
B) it is a check against inflation.
C) it provides protection for firms that have taken out loans in foreign currencies.
D) it keeps the exchange rate closer to its equilibrium rate.

Question

Quizplus · Accepted Answer

Currency pegging does not necessarily keep the exchange rate closer to its equilibrium rate. It fixes the exchange rate to another currency or a basket of currencies, which can lead to misalignments with the currency's natural market equilibrium rate, influenced by supply and demand.

All of the Following Are Advantages of Currency Pegging EXCEPT