When the exchange rate of a currency is fixed, or ‘pegged’, relative to another currency, basket of currencies, or to the price of a commodity such as gold. A peg can be used to assist in the control of inflation by giving edibility to an exchange rate policy. It can also be used to provide stability for exporters and importers if pegged to the currency of a significant trading partner. See also crawling peg exchange rate; fixed exchange rate.
|Reference: Oxford Press Dictonary of Economics, 5th edt.|