In many countries,an exchange-rate peg substitutes for ________.

Question

Quizplus · Accepted Answer

An exchange-rate peg substitutes discretionary monetary policy in many countries. A country with an exchange-rate peg agrees to maintain the exchange rate between its currency and another currency at a fixed exchange rate. This means that the central bank of the country cannot use discretionary monetary policy to influence the exchange rate because it has committed to maintaining a fixed exchange rate. This can be a disadvantage because the central bank cannot use monetary policy to address domestic economic issues.

In Many Countries,an Exchange-Rate Peg Substitutes for ________