Helania is a small country in Eastern Europe with a hard peg currency system that uses the euro. The country is undergoing a string of financial deregulations and is considering adopting a new FX system. As such, the Helanian government is considering creating its own currency, the Helanian 'Hela'. To do so, the government is considering two system options:

(1) a conventional-pegged arrangement to the euro; or

(2) a free-floating Hela.

a. Discuss how these new systems would compare to their current arrangement

b. Identify the main disadvantages to adopting either system.