Crawling Peg

Summary of Crawling Peg

A middle ground between fixed and freely floating exchange rates. Unlike the free- floating system in which exchange rates are determined by market forces alone, and a system of fixed exchange rates (i.e., the defunct Bretton Woods system), the crawling peg scheme envisions that various trading currencies would have par values in terms of each other, usually the average over time of daily spot rates. When the spot or current market rate deviated significantly from the floating par, or crawling rate, central banks would intervene to restore equilibrium. See Bretton woods agreement.

(Main Author: William J. Miller)