valuuttalinkkeja

Valuuttalinkkeja, often translated as currency pegs or currency links, refers to a monetary policy where a country's currency is fixed in value to another currency or a basket of currencies. This system aims to provide exchange rate stability, which can be beneficial for trade and investment by reducing uncertainty. When a currency is pegged, its central bank actively intervenes in the foreign exchange market to maintain the predetermined exchange rate. This typically involves buying or selling its own currency against the foreign currency to which it is linked.

The decision to adopt a currency peg is usually driven by economic objectives such as controlling inflation, promoting export competitiveness, or attracting foreign capital. However, maintaining a peg can be challenging. If the pegged currency's value is not aligned with market forces, the central bank may need to expend significant foreign exchange reserves to defend the peg. In extreme cases, speculative attacks on the currency can force a devaluation or abandonment of the peg. Examples of countries that have historically used or currently use currency pegs include certain developing economies and, in the past, some European countries before adopting the Euro. The effectiveness and sustainability of a currency peg depend heavily on the underlying economic conditions and the credibility of the central bank.