A currency peg is insulated from economic or political conditions, such that the exchange rate in the market will only change if the country's government breaks the peg and sets a new exchange rate.

Question

Quizplus · Accepted Answer

A currency peg is not necessarily insulated from economic or political conditions. Factors such as inflation, interest rates, and political stability can affect the value of the currency and may require adjustments to the peg. Additionally, speculative attacks on the currency can lead to pressure on the government to break the peg and allow the exchange rate to adjust.

A Currency Peg Is Insulated from Economic or Political Conditions