Editing Inflation (section)

=== Fixed exchange rates ===

{{Main|Fixed exchange rate system}}
Under a fixed exchange rate currency regime, a country's currency is tied in value to another single currency or to a basket of other currencies. A fixed exchange rate is usually used to stabilize the value of a currency, vis-a-vis the currency it is pegged to. It can also be used as a means to control inflation if the currency area tied to itself maintains low and stable inflation. However, as the value of the reference currency rises and falls, so does the currency pegged to it. This essentially means that the inflation rate in the fixed exchange rate country is determined by the inflation rate of the country the currency is pegged to. In addition, a fixed exchange rate prevents a government from using domestic monetary policy to achieve macroeconomic stability.<ref>{{cite book |last1=Blanchard |first1=Olivier |title=Macroeconomics: a European perspective |last2=Amighini |first2=Alessia |last3=Giavazzi |first3=Francesco |date=2017 |publisher=Pearson |isbn=978-1-292-08567-8 |edition=3rd |location=Harlow, London, New York, Boston, San Francisco, Toronto, Sydney, Dubai, Singapore, Hong Kong, Tokyo, Seoul, Taipei, New Delhi, Cape Town, Sao Paulo, Mexico City, Madrid, Amsterdam, Muinch, Paris, Milan |chapter=Output, the interest rate and the exchange rate}}</ref>

As of 2023, [[Denmark]] is the only [[OECD]] country which maintains a fixed exchange rate (against the [[euro]]), but it is frequently used as a monetary policy strategy in developing countries.<ref name=IMF/>