Eldoria's Pegged Exchange Rate Implications

In an attempt to stabilize its economy, the country of Eldoria has adopted a pegged exchange rate regime. In this regime, the Eldorian currency, the Eldor, is pegged to the United States dollar (USD) at a fixed rate. Recently, due to rising inflation and pressures on its foreign reserves, Eldoria's Central Bank decided to adjust the peg from 2 Eldors per dollar to 2.5 Eldors per dollar. In light of this adjustment, consider the implications of Eldoria's exchange rate regime, particularly concerning the long-run effects and the potential consequences of maintaining a pegged system in a volatile global market.

This new policy change has raised debates among policymakers, economists, and investors regarding the sustainability of a pegged exchange rate. Assess the potential benefits and drawbacks of this exchange rate adjustment and how it reflects on Eldoria's economic stability and monetary policy.