Explain why a peg is useful for reducing inflation

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Reference no: EM131109474

Argentina pegged its currency in 1991. Explain why a peg is useful for reducing inflation. Explain

why the following two things made the peg difficult to maintain a decade later:

(i) Inflation took a few years to converge to US levels after the peg was introduced;

(ii) the banking system began to see a large number of withdrawals starting in the late 1990s.

Reference no: EM131109474

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