Target zone arrangement

Target zone arrangement

A monetary system under which countries pledge to maintain their exchange rates within a specific margin around agreed-upon, fixed central exchange rates.

Target Zone Arrangement

An agreement between two countries and/or central banks to keep the exchange rates of their currencies within a certain range of a fixed rate. A target zone arrangement combines factors of a pegged currency and a floating currency in that it allows market factors to have an effect on the exchange rate while also giving one country or the other a competitive advantage in their imports or exports.
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