The linked exchange rate system (hereinafter referred to as the linked exchange rate system) is a fixed exchange rate system, that is, the exchange rate between the local currency and a specific foreign currency is fixed, and the 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".

According to the currency board system, the flow and stock of the monetary base must be fully supported by foreign exchange reserves. In other words, any change in the monetary base must be consistent with the corresponding change in foreign exchange reserves.

The linked exchange rate system is often related to stability. Today, many developing countries adopt the linked exchange rate system to create a stable environment for foreign investment. Under the linked exchange rate system, an investor will always know the value of his/her investment projects without worrying about daily exchange rate fluctuations. In addition, the linked exchange rate system is more likely to help reduce inflation because of the increased confidence in monetary stability.

/kloc-At the end of the 9th century, Britain proposed and established the linked exchange rate system for the colonies. Hong Kong, as a British colony, adopted this exchange rate system, which was pegged to the pound, abolished at 1972, reopened at 1983, and pegged to the US dollar at 7.8 Hong Kong dollars 1 US dollar.

Typical examples are the linked exchange rate system of the Argentine peso against the US dollar and the linked exchange rate system of the Bulgarian lev against the German mark (now the euro).