Question

define the following:

9. Crawling pegs

10. Currency board

11. Speculative attack

12. Secular stagnation

Answer 1

Answer 9) Crawling Peg - A crawling peg is an exchange rate system adjustments in which a currency with a fixed exchange rate is allowed to fluctuate within a band of rates. Crawling pegs are generally used to control currency moves when there is a threat of devaluation due to factors such as inflation or economic instability.

Currency board - A currency board is a form of a pegged exchange rate. Management of the exchange rate and the money supply are removed from the nation's central bank, if it has one. Addition to a fixed exchange rate, a currency board is also generally required to maintain reserves of the underlying foreign currency.

Speculative attack - it occurs in the foreign exchange markets when speculators attack the currency of a country attempting to maintain a fixed, or pegged exchange rate. If the country does not hold enough foreign currency reserves to purchase enough of its domestic currency, the attack can result in the peg failing.

Secular stagnation - Stagnation is a prolonged period of little or no growth in an economy. Economic growth under 2 to 3% annually situation is defined as stagnation, and it is highlighted by periods of higher unemployment and involuntary part-time employment. Secular stagnation means a state of little or without economic growth. An environment where the economy is essentially stagnant.

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