If a currency X is pegged to another currency Y which collapses, what happens to currency X?

  • $\begingroup$ This question, as is, is a little too much of an open ended hypothetical to be very useful to other people on this site (see Guy's answer below). $\endgroup$
    – Kitsune Cavalry
    Nov 9 '18 at 0:39

You need to define "pegged" and "collapses"... Setting a fixed exchange rate is by controlling the local currency's amount of money

If the economy of currency X's owner goes bankrupt (a "collapse"), why would the Y currency owner continue to keep the attachment...? Usually "pegging" currencies together is to a strong currency, like the US dollar

If the onwer of Y currency will keep attaching Y to X, it will create a local hyper inflation, and hurt its own economy...


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