Questions tagged [currency-peg]

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Determining a better model for for a new currency

I am in no way an economist (Just a computer programmer) and want to learn if we can use the gold standard (With improvements for using it in the Crypto domain) For example; If we have a physical ...
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How do currency boards maintain a 100% foreign reserve backing in the presence of fractional reserve banking?

Under a currency board system, money in circulation has to be 100% backed by foreign reserves. Suppose the domestic currency (A\$) is 100% backed by a foreign currency (B\$), with a fixed 1:1 ratio. ...
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Is it possible to peg a cryptocurrency to a stock or bond index?

What if the creators of a new cryptocurrency gave out new units of the cryptocurrency in exchange for shares of a stock or bond index fund, held these shares in reserves, and allowed owners of the ...
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How can the HKMA peg the Hong Kong dollar at 7.8 HKD/USD for so long?

A lot of pegged exchange rate systems don't stay pegged for so long (e.g. because the central bank run out of reserves to maintain their values) So far I understand that the HKD is 100% backed by the ...
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How can a one currency gain against the other if it is pegged aginst it?

I have been reading about when the Swiss national Bank decided it would no longer peg its currency against the euro and this caused massive turmoil in the markets. But my question was before this the ...
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How does Egypt prevent people from arbitraging their currency?

Apparently Egypt uses a fixed exchange rate so there is a substantial difference between the government rate for the Egyptian pound and the price on the street. What prevents someone from just buying ...
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How could having more US dollars solidified the 1991 Argentine peg to the US dollar?

In an economics textbook, Modern Principles of Economics, the authors, Tyler Cowen and Alex Tabarrok, write that "The Argentine government did not have enough U.S. dollars to keep up the value of the ...
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Currency triplets - arbitrage opportunity?

I have three currency pairs - USDEUR - 0.88, USDINR - 67.13 and EURINR - 75.88 , so simple math tells me that EURINR should be USDINR/USDEUR = 76.28 ...this is a fairly significant deviation from an ...
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Why would Switzerland, with its export-driven economy, worry about weakening against the dollar?

I was reading about the SNB's decision to abandon the peg in 2015, and among the various articles I read, one from CNBC quoted the SNB president saying the following "The euro has depreciated ...
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Book for Bretton Woods conferences and gold standard

I am looking for a good book to explain to me why the gold standard existed and why in the Bretton Woods conferences, some countries choose to abandon it. An explanation of the general scenario in a ...
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Why Chinese exports increased even though Yuan appreciated after the Chinese removed the peg against USD?

After the Chinese central bank removed the peg against USD, yuan appreciated but Chinese exports didn't seem to be affected. They are steadily increasing. How can this be explained ?
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Why are European countries happy to be outside Eurozone?

In EU countries like Poland, Czech Republic, Hungary, etc, people are happy that they are not in Euro zone and Euro crises like that of Greece do not affect their economics. However, some European ...
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What economics aggregate(s) could suggest an imminent change in exchange rates?

I have read articles about the Swiss Franc breaking its peg with the dollar and I would like to understand what indicators people look at to determine whether a currency break/depegging is imminent. ...
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Currency Peg or Currency Substitution/Dollarize?

Why would a sovereign state choose an exchange rate peg over the demonetization of the local currency, replaced by hard currency? In the case of the West and Central African CFA Francs, France has an ...
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3 answers
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Why is the Euro a bad idea compared to other currencies?

Many economists, including Nobel laureates Paul Krugman and Joseph Stiglitz, have said that the Euro was a bad idea from the beginning and is a major reason for all the current economic problems. My ...
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How did the Plaza Accord revalue the Japanese Yen?

In September 1985, Japan, the US, and three other nations agreed to the "Plaza Accord," which appreciated the Yen and Deutsche Mark. The value of the Japanese Yen appreciated from 200 Yen per Dollar ...
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Currency Devaluation and the causes of the Tequila Crisis

I was reading about some of the famous crisis that happened in the past and i came across "the tequila crisis" in mexico during 1994-96. As a background, The Tequila crisis (also known as the Mexican ...
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What exactly is Foreign Currency Indexation?

As I understand it, foreign currency indexation (FCI) is when a government pegs its currency to another (usually the dollar), and their central bank buys or sells dollars to maintain a stable exchange ...
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5 votes
2 answers
240 views

Unlimited supply of national currency?

I was reading this article about Denmark central bank defending its currency peg: http://www.bloomberg.com/news/2015-01-22/denmark-cuts-key-deposit-rate-to-minus-0-35-to-drive-down-krone.html In it ...
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6 votes
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What did the Swiss National Bank use to purchase EUR while pegging the Franc to the Euro?

To peg its currency (CHF) to the Euro (EUR), the Swiss National Bank (SNB) made purchases of EUR to the tune of several hundred billion. By reducing the supply of EUR, the SNB made the EUR relatively ...
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2 votes
1 answer
160 views

Why did the Swiss National Bank end the currency peg?

The title says it all. Why did the Swiss National Bank end the currency peg? The issue obviously has many aspects, so I'm looking for a concise summary with references to explanations for each of ...
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When and to what extent should the money supply of a pegged currency be included in the "parent" currency?

For example, the Manx pound is in a de facto currency union with GBP. The Isle of Man Bank chooses to back IMP one-to-one with Bank of England notes, but is not legally required to do so. At one-to-...
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