Exchange Rate Management: Fixed Parity with Crawling Bands

A country with persistent inflation on a fixed parity exchange rate regime is trying to protect its foreign currency reserves. Every two weeks, the central bank preannounces the central parity rate for the next two weeks. This form of currency regime is _best_ described as:

Correct. Under an active crawling peg system, the central parity rate is preannounced for the coming weeks. This is designed to control inflation expectations.

Incorrect. Under a passive crawling peg, the central parity exchange rate is adjusted frequently. However, the target central rate for the coming weeks is not preannounced.

Incorrect. In a fixed parity exchange rate with crawling bands, it is not the central parity rate that is adjusted. Rather, the upper and lower intervention bands are widened gradually over time, however.

an active crawling peg.

a passive crawling peg.

a fixed parity exchange rate with crawling bands.