Fixed parity with crawling bands is when the exchange rate is initially pegged but gradually moves towards a more flexible system with pre-announcement of widening of the band around the central parity. This system allows the central bank to be more flexible in determining its monetary policy.
For example, the central bank fixes the exchange rate and maintains fluctuations around about one percent of central parity, say Rp14,000 / USD (+/-1%). Then, for next month, the central bank widens the band’s target to +/- 2% of a central parity.
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