A hard peg, also known as a currency board arrangement or a fixed exchange rate system, is a monetary policy mechanism in which a country's currency is tied directly to the value of another currency or a specific asset, such as gold. Under a hard peg, the exchange rate is fixed and maintained at a predetermined rate, and the central bank commits to exchanging the domestic currency for the anchor currency at that fixed rate.

This type of arrangement is often used to provide stability and credibility to a country's currency and to promote economic and financial stability. It limits the discretion of the central bank in conducting monetary policy, as it must hold sufficient reserves of the anchor currency to back the domestic currency in circulation.

While a hard peg can provide benefits such as low inflation and reduced exchange rate volatility, it also comes with risks. If the value of the anchor currency changes significantly or if the country experiences economic shocks, maintaining the fixed exchange rate can become challenging and may require strict fiscal and monetary policies to support the peg.