Denmark pegs its currency to the euro. Even though Denmark opted not to join the single currency in 1999, it has pegged its currency very tightly to the euro ever since and keeps the value of the krone within a +/−2 percent band. How do you explain that Denmark seems to be willing to bear the cost of a tight peg to the euro without fully enjoying the benefits of membership to the single currency?
Denmark pegs its currency to the euro. Even though Denmark opted not to join the single currency in 1999, it has pegged its currency very tightly to the euro ever since and keeps the value of the krone within a +/−2 percent band. How do you explain that Denmark seems to be willing to bear the cost of a tight peg to the euro without fully enjoying the benefits of membership to the single currency?
Chapter22: International Finance
Section: Chapter Questions
Problem 8QP
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Denmark pegs its currency to the euro. Even though Denmark opted not to join the single currency in 1999, it has pegged its currency very tightly to the euro ever since and keeps the value of the krone within a +/−2 percent band. How do you explain that Denmark seems to be willing to bear the cost of a tight peg to the euro without fully enjoying the benefits of membership to the single currency?
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