Crawling peg

(redirected from Adjustable Peg)
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Related to Adjustable Peg: Managed float

Crawling peg

An automatic system for revising the exchange rate. It involves establishing a par value around which the rate can vary up to a given percent. The par value is revised regularly according to a formula determined by the authorities.

Crawling Peg

A situation in which one currency links its value to that of another currency, but allows it to fluctuate within certain limits. This differs from a straight peg, which has one currency permanently valued at a certain amount in relation to another currency; it also differs from a floating currency, which changes in value according to market factors. A crawling peg may be valuable if a currency would otherwise be exceptionally volatile; it allows the currency to fluctuate to an acceptable level.
References in periodicals archive ?
The Bretton Woods adjustable peg was in some respects similar to the gold standard contingent rule, but it invited speculative attack hence weakening the escape clause.
25) The Bretton Woods regime cannot be characterized as a fixed exchange rate regime throughout its history: The preconvertibility period was close to the adjustable peg envisioned by its architects, and the convertible period was close to a de facto fixed dollar standard.
It collapsed both because of fatal flaws in its design (the adjustable peg in the face of improved capital mobility and the confidence problem associated with the gold dollar standard) and the lack of commitment by the United States to the gold standard convertibilty rule.
The EMS, although not based on gold, incorporated many of the features of the Bretton Woods adjustable peg system.
To prevent these ills, the case for an adjustable peg system was made by Keynes, White, Nurkse and others.
Both Keynes, leading the British negotiating team at Bretton Woods, and White, leading the American team at Bretton Woods, planned an adjustable peg system to be coordinated by an international monetary agency.
Second, they revealed a basic weakness of the adjustable peg arrangement--the one-way option of speculation against parity.
The second important difference between the convertible Bretton Woods system and the intentions of the Bretton Woods Articles was the evolution of the adjustable peg system into a virtual fixed exchange rate system.
The collapse of a system beset by the fatal flaws of the gold exchange standard and the adjustable peg was triggered by an acceleration in world inflation, in large part the consequence of an earlier acceleration of inflation in the United States.
In addition, the adjustable peg system evolved into a virtual fixed exchange rate system.
Another important source of strain on the system was the unworkability of the adjustable peg under increasing capital mobility.
The exchange rate mechanism of the EMS was designed as an adjustable peg exchange rate system, but its architects hoped to avoid the problems that plagued Bretton Woods.

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