Helania is a small country in Eastern Europe with a hard peg currency system that uses the euro. The country is undergoing a string of financial deregulations and is considering adopting a new FX system. As such, the Helanian government is considering creating its own currency, the Helanian 'Hela'. To do so, the government is considering two system options: 

(1) a conventional-pegged arrangement to the euro; or 

(2) a free-floating Hela. 

a. Discuss how these new systems would compare to their current arrangement  

b. Identify the main disadvantages to adopting either system. 

Answer rating: 100% (QA)

a 1 Under a conventionalpegged arrangement to the euro Helania would still have a fixed exchange rate with the euro meaning the value of the Hela woul... View the full answer