Linked exchange rate system (English: linked exchange rate system) is a fixed exchange rate system, that is, the exchange rate between local currency and specific foreign currency is fixed, and currency circulation is linked to foreign exchange reserves in strict accordance with the established exchange rate. If the linked currency is the US dollar, it can also be called "dollarization".

Features: stronger commitment to the stability of local currency exchange rate, less possibility of reversal.

Advantages: the currency value is stable and the market transaction cost is reduced.

Disadvantages: The linked exchange rate system is considered to be very fragile when the financial crisis comes. For example, Argentina abandoned the linked exchange rate system, greatly reduced the official exchange rate and introduced a dual exchange rate system in the ongoing turmoil of the economic crisis.

The central bank adopts the linked exchange rate system, which cannot play the role of lender of last resort, provide liquidity by loosening monetary policy, and directly finance troubled commercial banks. In fact, the decision-making power of monetary policy is handed over to the management authorities linked to the currency.

In the case of pegging to the US dollar, the central bank loses three kinds of seigniorage income: local currency issuance, local currency demand growth and local currency stock interest.