Latest / Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates
How Central Banks Use Exchange Rate Pegs as Policy Tools
Episode 61 of Monetary Policy Explained with Fexingo dives into the mechanics and trade-offs of exchange rate pegs. Lucas and Luna break down how the Hong Kong Monetary Authority has maintained a peg to the US dollar since 1983, why it requires holding over $400 billion in foreign reserves, and what happens when a peg comes under pressure—using the 1997 Asian Financial Crisis and the 2022 Turkish lira collapse as contrasting examples. They explore the policy trilemma: no central bank can have independent monetary policy, free capital flows, and a fixed exchange rate all at once. This episode…
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