*2.2.2 The fixed rate of exchange regime*

In the fixed exchange rate regime, the exchange rate of the local currency is pegged to the amount of another country's currency or a basket of currencies or the Special Drawing Right (SDR). The monetary authority adjusts this peg in the scenario where misalignment becomes a threat to the economy. Fixed exchange rates are to "promote certainty and orderliness in foreign exchange markets and of course in international trade transactions" [13, 14]. Alade [12] opined that the fixed rate of exchange regime can achieve stability and the ability of the local currency to compete when the peg is credible, though noting that "the regime is prone to currency crises if the country is open to international capital market (free capital mobility) because of the limited shock absorptiveness capacity".
