Crawling Peg

An exchange rate system in which a country pegs its currency to the currency of another nation but allows the parity value to change at regular time intervals.

For example Nicaragua has had a crawling-peg system since 1998. In order to promote exchange-rate stability and facilitate exports, Nicaragua pegged the value of its domestic currency, the cordoba, to the U.S. dollar. However the difference in macroeconomic conditions in the two countries, namely inflation difference made the cordoba have the general tendency to depreciate against the dollar. Hence, Nicaragua adopted a crawling peg. It allows for a small weekly rate of crawl, or depreciation, of the cordoba relative to the U.S. dollar.