Fiscal
Currency Peg (Fixed Exchange Rate)
Definition
A monetary policy where a country fixes its exchange rate to another currency (usually the US dollar or euro), rather than allowing it to float freely.
Explanation
Gulf states (Saudi Arabia, UAE, Qatar) peg to the dollar, providing stability for oil-denominated trade. Hong Kong maintains a dollar peg. Pegs provide predictability but remove monetary policy flexibility — the country must follow the anchor country's interest rate policy. Pegs can collapse spectacularly when economic conditions diverge (the Argentine peso board collapse in 2001).