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It is useful to note at this point that many countries, particularly small ones,
not only take their currencies to a major currency or do a basket of currencies.
Sometimes the peg is allowed to glide smoothly upward or
downward in a system known as a Gliding, or Crawling Peg.
Since your Gliding or Crawling Peg system offers a combination of
the stability of a fixed peg approach with the flexibility of a floating one.
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Some countries may also join together in a currency bloc in order to stabilize
exchange rates amongst themselves.
These countries then allowed their single currency to flow relative to those of
the rest of the world.
The most important of this blocs is the European Union which in
1999 moved to a single currency the Euro.
The story behind the birth of Euro as one of the world's major currencies is
well worth telling as it illustrates both the difficulties of finding a stable
exchange rate system and the advantages of coordinating policies across countries.
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With the demise of the US dollar standard and in the late 1970s
the nations of Europe established a fixed exchange rate system.
It was pegged to the German Mark in the hopes of avoiding
a repeat of the competitive devaluations and
economic disruptions that had plagued Europe leading up to World War II.
In fact, this European monetary system worked reasonably well for over a decade.