A currency board can ________ a country's ability to act as a lender of last resort.

Question

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A currency board operates by pegging the value of a country's currency to that of a more stable and widely accepted currency, typically the US dollar or the euro. The currency board is obligated to exchange its domestic currency for the anchor currency at a fixed rate. This means that the currency board cannot create or lend out its own currency to support its domestic financial system or act as a lender of last resort. Instead, it must rely on its foreign reserves to maintain the stability of the currency peg. Therefore, a currency board limits a country's ability to act as a lender of last resort.

A Currency Board Can ________ a Country's Ability to Act