Description

A key objective of exchange rate pegs is to achieve price stability by stabilizing the value of the currency. However, the effectiveness of an exchange rate peg as a nominal anchor crucially depends on its operational design. This note provides guidance on how different exchange rate peg arrangements—such as bilateral exchange rate pegs, pegs to a basket of currencies, crawling pegs, and currency bands—can be effectively implemented. Specifically, the note focuses on operational considerations relevant to ensuring long-run price stability, such as choosing an appropriate anchor currency, setting the rate of crawl, and designing bands. The note also discusses how to conduct monetary and foreign exchange operations consistent with the chosen exchange rate peg arrangement.

More publications in this series: IMF How-To Notes