When a domestic currency is completely backed by a foreign currency and the note-issuing authority establishes a fixed exchange rate to this foreign currency,then the country is said to have

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The situation described is that of a currency board, which involves a country fully backing its domestic currency with a foreign currency and maintaining a fixed exchange rate. This is a stricter form of a fixed exchange rate system than an exchange rate monetary system, which only requires a certain level of foreign currency reserves to be held. Dollarization involves a country adopting a foreign currency as its own and abandoning its domestic currency, while a managed exchange system involves some degree of flexibility in the exchange rate.

When a Domestic Currency Is Completely Backed by a Foreign